A recent court matter involving the death of BC real estate giant Innocenzo de Cotiis, the founder of Onni group, provides a good case study of how families can use various planning tools to protect their wealth and avoid costly litigation.
Innocenzo died in 2020. He was survived by seven children, all boys. Prior to his passing, Innocenzo settled two Alter Ego Trusts, and placed virtually all of his wealth into these Trusts. The effects of moving his assets into these Trusts are twofold: Firstly, the assets moved into the Trusts no longer form part of Innocenzo's estate and are thus sheltered from claims against his estate. Secondly, because the assets moved into the Trusts are not part of Innocenzo's estate, they are not subject to probate fees and they are not subject to public disclosure through probate. Accordingly, in the right circumstances, Alter Ego Trusts can be effective succession planning tools for individuals who seek to reduce fees on death, establish a more private succession of assets, and/or protect their assets from estate claims.
In Innocenzo's case, one of his sons has commenced legal proceedings against his estate and his Trusts. The claims are partly connected to the initial set up of the Trusts. More specifically, who was granted control over the Trusts (ie – the 4 youngest sons), and how beneficial entitlement would be allocated by those in control. While litigation is unavoidable in some circumstances (possibly this one included), some claims can be avoided through attention to detail on initial set up. For example, if an individual's beneficiaries struggle to get along, then the administration of the estate or trust may run more smoothly with a third party Executor or Trustee appointed, such as a Trust Company.
Innocenzo's beneficiaries are now set to inherit significant wealth. On receiving such wealth, it would be good planning for Innocenzo's beneficiaries to consider setting up cohabitation agreements with their spouses to protect their inheritances and business control from claims in the event of a separation in the future. Cohabitation agreements are effective planning tools to avoid costly litigation on relationship breakdowns.
Where beneficiaries stand to receive significant inheritances, another effective planning tool to consider is the establishment of trusts for each beneficiary. These trusts would be created through the parent succession documents, such as the parent's Will or Alter Ego Trust (or other form of Trust). The effect is that, on death of the parent, the inheritance would not go personally to that beneficiary but instead would be transferred into a separate trust for the benefit of that beneficiary and perhaps his or her family. There is flexibility on the terms used in these sub-trusts to accommodate differing circumstances, which would need to be thought through on the initial set up of the parent's succession documents. These sub-trusts keep the inheritance outside of the beneficiary's estate, which protects the inheritance from claims against that beneficiary during his or her lifetime and upon his or her death.
The planning tools mentioned above represent just a few examples of ways individuals can protect their wealth on succession. Innocenzo's estate is a perfect example to demonstrate how these planning tools can be set up, and the value they add in protecting wealth upon succession and into the future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.