If nothing else, this month’s fiscal goings on should at least remind us of the often quoted words of the American inventor and statesman, Benjamin Franklin: “…in this world nothing can be said to be certain, except death and taxes.” And yet of these two certainties in life it seems, despite our best intentions, we often plan very little for either.

As an estates practitioner I find it interesting the amount of time, effort and expense we (myself included) put into events that can change with the weather or into personal projects that will ultimately have little to no bearing on our lives in 10 years time, while our personal succession plan flaps haphazardly in the wind. Yes, I know…. pondering the complexities of your estate plan is perhaps not the most exciting of pastimes. In fact it’s often suggested that estate planning texts should be somewhere around the top of the reading list for patients suffering from insomnia! But is boredom really the reason we fail to plan? I imagine it may play a part but what’s the real reason? Why do we do this illogical thing – plan for what can change but fail to plan for the inevitable? I’ve asked that very question to many a client and attendee at estate planning presentations. The answers vary and are many. But the overwhelming theme seems to suggest that the real reason has a lot to do with the simple fact that death is just not a subject most people like to dwell on – particularly their own! Try it sometime. Start talking to someone about your own death and I can almost guarantee that that conversation won’t last long, unless you’re paying the person listening! And so I’ve begun to wonder if our apprehension toward estate planning is mostly to do with our perception of death. Of course, from here we can go just about anywhere – religion, philosophy, science, psychology… and the list goes on. But whatever your, no doubt complex, views are on the subject, I think a very practical observation still rings true: “We don’t plan for what we’re not looking forward to.”

Of course we can’t trivialize death, as it is a very real and difficult subject for many of us; and understandably so. But in my experience, the best approach I’ve seen is when clients begin to see positives in their own passing. This sounds strange, but for these clients death becomes less of a question of, “When will I be leaving?” and more of a question of, “What will I be leaving behind?” The truth is everyone has a legacy, something of value to the next generation. And it’s this idea of leaving a lasting legacy that is inspiring and converts the chore of estate planning into the creative task of leaving sentimental gifts and appropriate resources to family and friends.

So the next time you feel yourself pushing some much needed estate planning to the side, ask yourself, “How do I feel about dying?”

As society continues to diversify and evolve, a fundamental tenet of any democratic society is ensuring that laws are enacted to protect the rights of individuals. This past year in the UK saw a major addition in the area of anti-discrimination laws with the introduction of the Equality Act. The introduction of the Act in the UK begs the question of whether it is a foreshadowing of what could, rather what should happen in Bermuda.

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Discovery in an action pending in the Supreme Court of Bermuda, civil jurisdiction or commercial court, means Discovery of Documents. The procedure on Discovery of Documents can raise many questions of a complicated and intricate character.

To learn more, download a copy of the article.

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Caterer?: check.

Bridesmaids?: check.

Invitations?: check.

Pre-nuptial Agreement.…..?

No, this is not a trailer for the latest Katherine Heigl movie. Rather, this is how a checklist for a wedding of the future might look. Not a very romantic thought, I know, particularly so soon after St.Valentine’s Day. But there is nothing romantic about a divorce. Too often, as too many can attest, divorces are difficult, protracted, expensive, and unpredictable. And it is that expense and unpredictability that those who support pre-nuptial agreements would seek to remedy.

Traditionally, our judiciary and that of the United Kingdom would not be numbered among those supporters. Indeed our courts have jealously guarded the right to review and at the very least oversee even those separation provisions which are made by married couples. So what is changing?

To trace the change, we need to look back at the year 2000. In that year, the House of Lords, in the United Kingdom, handed down its decision in the case of White-v-White. That judgement and others that followed soon after gave very careful consideration to the bases on which property should be divided when a marriage breaks down. The catchwords to bear in mind are “needs, compensation and sharing”. The compensation criterion, in each case, will depend on the particular facts. In one case, the wife had put her career on hold to stay home with the children. The end result of these decisions is that, increasingly, family property is divided on something closer to a 50/50 basis now. This is a departure from earlier decisions and has a particularly important effect when the spouses are fairly well off.

Of course divorce law remains, as its practitioners like to say, an art rather than a science. No two cases are alike. Many factors need to be considered, most of which are set out in our Matrimonial Causes Act 1974. The length of the marriage, the age and health of the spouses, their earnings and earning capacities, the source of any assets, the number of children and the standard of living of the family are simply some of those considerations.

Nevertheless, it was in response to the tendency of the courts to move toward a more equal division of assets upon divorce that the argument for pre-nuptial agreements began to gather strength. That, and the fact that things are done differently elsewhere.

Anyone who watches e-news or any stories of the ‘rich and famous” will know that prenups are common in some parts of the United States. They are also not unknown in some European countries. And what do these jurisdictions have in common? They tend to uphold the concept of “community of property”. In other words, one finds a 50/50 division of assets in many instances of marriage breakdown. Accordingly, so the argument goes, if we are moving in that direction too, people should be free to “contract out” or decide for themselves, in advance, how they would like to divide their assets if they part.

Recent decisions in the UK suggest that the courts may be more readily convinced of this argument than was previously thought. Those decisions also suggest that, in appropriate circumstances, a pre-nuptial agreement may be more than just a factor to be considered, but may actually be very influential indeed.

That “appropriate circumstances” caveat is important. Current case law suggests the following guidelines: there must not have been any duress or pressure to sign the agreement; each party must have the opportunity to get independent legal advice; provision of some nature should be made for the less well off partner; and thought must be given to providing for any children in the marriage. Also, some time should elapse between the signing of the Agreement and the actual ceremony… the eve of the wedding would not be the optimum time to whip out a prenup!

A further suggestion: A 2008 Privy Council decision reflected the court’s continuing discomfort with pre-nuptial agreements, suggesting that it would be wise to reaffirm the agreement after marriage. The contract then becomes a form of separation agreement and is more likely to be enforced.

Only time will tell how influential or important such agreements will become in Bermuda. But for now, we can state that the old adage that, in our jurisdiction, a pre-nuptial agreement is “not worth the paper it is written on” no longer holds. So, go back to that checklist and pencil in a prenup.

Honor Desmond-Tetlow is a senior associate in MJM’s litigation group and advises on all areas of matrimonial and family law and in general civil litigation. She is also a trained mediator and certified in collaborative law.

Postscript: Since I wrote this article, the UK Supreme Court has handed down the very important decision of Radmacher –v– Granatino [2010] UKSC 42. This case copper fastens our position that Pre-Nuptial agreements are and will be of increasing importance. It establishes that a Pre-nup can be of “decisive weight” in the distribution of assets on divorce. The earlier Privy Council decision, which was a more conservative one, is probably therefore no longer good law.

This article addresses some of the general principles of Bermuda divorce law and also examines some misconceptions which are fairly widely held.

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Phoenix Capital Reserve Fund and Phoenix Global Fund Ltd (“the Funds”) are two related small private hedge funds which, after a brief period of successful trading, made spectacular losses in 2003 and early 2004. In an action brought against their former administrators and their custodian, the Funds alleged that the responsibility for the losses incurred lay with the service providers because they had failed to stop the Funds from making the bad investments.

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Segregated Accounts Companies (variously known as ‘cell companies’, ‘segregated portfolio companies’, ‘protected cell companies’ and ‘incorporated cell companies’) have been in existence in different commonwealth jurisdictions from the early 1990’s but have not yet given rise to any reported litigation analysing their constitution, effectiveness or the remedies available against them.

In the case Tensor Endowment Limited v New Stream Capital Fund Limited, the Bermuda Supreme Court had to consider an application by a segregated account owner and/or creditor for the appointment of a receiver over the assets of one of the segregated accounts on the grounds of insolvency or that it was ‘just and equitable’ to appoint a receiver.

PLEASE NOTE: this article is in the process of being updated

During these difficult economic times, buying a piece of the rock may be the last thing on your mind. This may, however, be a time to take advantage of the great opportunities of a “buyer’s market” and climb on the property ladder, especially for the first-time Bermuda home buyer. Property prices are becoming reasonable, vendors are willing to negotiate and the rates offered by Bermuda lenders are at the lowest levels in years.

Before you make an offer on that dream home, the first thing you should do is to see what you can afford and make sure you factor in all closing costs associated with the purchase. The best place to start is to make appointments with local lenders and seek a pre-approved level of financing. Once this threshold is determined, you should calculate the associated closing costs for the transaction with your loan officer.

The first cost to consider is Government Stamp Duty charged on the transfer deed. It is normal in Bermuda for these costs to be shared equally by the purchaser and the vendor but this is a point of negotiation with each transaction. Government Stamp Duty on a transfer deed is based upon an escalating percentage of value. For example, total stamp duty costs on a transfer deed for a $500,000 purchase is $14,000; for a $750,000 purchase, $24,000; and for a $1,000,000 purchase, $34,000.

Government, as outlined in its recent budget announcement, will eliminate stamp duty costs for qualifying first-time home buyers on sales/purchase transactions of $750,000 or less. You will see from the costs above that this amounts to a significant savings.

The next closing costs to consider are legal fees for the transfer deed. As with stamp duty on the transfer deed, it is normal for these costs to be shared equally by the purchaser and the vendor. These fees are based on the Bermuda Bar Association’s recommended scale of fees and are tied directly to the purchase price of the property. Examples of the estimated total legal costs charged for a transfer deed are $5,725 for a $500,000 purchase; $6,975 for a $750,000 purchase; and $8,225 for a $1,000,000 purchase.

There are also costs associated with your mortgage. Your attorney must prepare a mortgage deed and there are stamp duty and legal costs associated with this document. Unlike costs for the transfer deed, these costs are for the sole responsibility of the purchaser/borrower.

Government stamp duties on mortgages are charged at one-quarter of one percent on the amount being borrowed when the mortgage is $400,000 or less, and one-half of one percent if the mortgage is more than $400,000. Following this guide, stamp duty for a $500,000 mortgage would be $2,500; for a $750,000 mortgage, $2,750; and for a $1,000,000 mortgage, $5,000.

Legal costs for the mortgage are again based on the Bermuda Bar Association’s recommended scale of fees and are directly associated with the amount being borrowed. Examples of the estimated total legal costs charged for a mortgage are $3,150 for a $500,000 mortgage; $3,500 for a $750,000 mortgage; and $3,800 for a $1,000,000 mortgage.

You should also be aware that lenders in Bermuda generally charge an administration or negotiation fee of up to one percent on your mortgage. The actual amount will be confirmed for you by your loan officer. Therefore, if you borrow $1,000,000 from a lender, they will charge a one percent administration fee of $10,000. This amount will be deducted from your loan so you will actually receive only $990,000.

To get an idea of total closing costs, let’s look again at our three examples. Based on a transaction in which the purchaser is not a first-time home buyer that qualifies for stamp duty exemption on the transfer deed, the costs for the transfer deed are shared and the purchaser borrows the full amount of the purchase price, the estimated closing costs for a $500,000 purchase would be $20,512.50; for a $750,000 purchase, $29,237.50; and for a $1,000,000 purchase, $39,912.50.

There may be other closing costs associated with your purchase such as legal costs for the negotiation and preparation of the contract agreement for the purchase, government search and document registration charges, surveying costs, property valuation costs or licence fees if any of the purchasers are non-Bermudian. You should contact your attorney to discuss all of the costs associated with your particular transaction.

Denis de Frias is a partner in MJM’s property, trusts and estates practice group. mjm.bm

Printed with permission of the Bermuda Sun

It can be said that what you do with your will after it has been written is just as important as the will itself. It’s not rare for clients to tell me that they are certain that a recently passed loved one made a will, but at the same time admit that they have no idea where it is. I have seen other clients thankful to have been given real estate under a will, only to be disappointed later when they discover that the property was sold by the deceased while he or she was still alive. These all-too-common situations emphasise the fact that, although preparing your will is a big step in the right direction, it certainly should not be viewed as the last step in taking proper care of your estate. Perhaps, the first thing to consider after making a will is where to store it. This may seem like something simple, but it is, in fact, where many problems start. Leaving your will in an unsecure place, such as around the house or even in a home safe, to which various family members have access, can leave your will susceptible to tampering, damage, misplacement and/or theft. Even that generic “safe place,” which tends to be a place to which no one else has access, can unintentionally create an expensive and time consuming problem for the executors of your estate when it comes time for them to access your will.

Most law offices, if they have prepared your will or are otherwise assisting you with your estate planning, will offer free storage of your will in their vault. Another storage option is a bank safe deposit box. In both cases, however, be sure to retain a copy of your will and inform someone (the executors are usually a good choice) of the existence of your will and where it is being kept. Providing them with a copy of the will is not a bad idea either. Should you chose to store your will with the bank, ensure that the persons you have informed of your will also have access to the safe deposit box by providing them with a key and/or establishing with the bank their authorisation to view the contents of the box. Once storage has been sorted, it is a good idea to review a copy of your will every three to five years; or sooner if there is a substantial change in your personal circumstances, such as a marriage, a divorce, the birth of a child, the death of a primary beneficiary, or after you acquire a major asset such as real estate or a substantial shareholding.

Upon your review, should you feel that your will no longer reflects your wishes or your current circumstances, alterations can and should be made. In the past, this was done using what is known as a codicil – a separate document that works to modify the original will. Nowadays, thanks to the PC, an attorney will usually incorporate the changes into the original document and produce a whole new will so that the client is not left with two separate documents.

Once an original will has been made, it is fairly inexpensive to have your attorney effect minor changes. But be aware – for reasons discussed in Part 2 of this series, it is strongly advised that you not make your own alterations to your will. Not only are such alterations likely to be ineffective, the time spent determining the validity of such alterations will probably end up costing your estate more than they are worth. Finally, remember that if your wishes or circumstances drastically change, you can revoke your will at any time during your lifetime. And this can be done in a variety of ways, such as by a subsequent will or codicil, by intentional destruction of the will, by a signed declaration of such intention or even as a result of a subsequent marriage. Note, however, that unlike a marriage, a divorce does not completely revoke a will; instead, its effect is such that the former spouse is treated, for the purpose of applying the terms of the will, as having died on the date of the divorce.

In many ways, having a will is much like owning a family home. It is a valuable asset that provides security and ensures a legacy. But like any home, there’s always maintenance to be done. Thankfully though, “will maintenance” is not as labour-intensive as painting your roof or cutting your grass! But it does involve getting your will out every so often and taking a good look at its contents to ensure that it’s just as current and effective as the day you signed it.

You won’t hear this from most estate attorneys but the truth is there is a wide variety of inexpensive home-made will “kits” available on the market today. From ready-made “fill-in-the-blank type forms” to elaborate computer programs. But beware, as the saying goes, “You get what you pay for.”

Before tackling all those estate planning issues you’ve been meaning to get to – like getting your will prepared, you should be aware that writing your own will is not advised. Of course, in these uncertain economic times, the substantial difference in cost between preparing your will with a professional and going out and purchasing an inexpensive “DIY will” dictates that an explanation be given as to why writing your own will is not such a good idea (no matter how much money you seem to be saving in the short-term).

To begin with, the idea of writing your own will based on a “fill-in-the-blank style” form or with general “catch-all” templates goes against one of the fundamental purposes of writing a will – that being to create a tailor-made document that is going to deal exactly with the issues of your estate and ensure your wishes are properly carried out. The problem with the DIY style will is that it leaves you with only blank spaces and general templates with which to create this very important “tailor-made” document that will one day be used to fulfil a very specific purpose – the administration and distribution of your estate. You may end up with a very legal looking document that seems to express your specific wishes for your estate, but the reality is that the limiting structure of the DIY style will can have the tendency to force its users (often unbeknown to them) to fit and squeeze their estate plan into the format of the will instead of the other way around. Inevitably, the home-made will writer, whether he knows it or not, is left with something less (or more) than what was originally intended.

Another reason for not writing your own will is that it is expensive. Yes, the DIY will kit you might find at the store or online will cost you next to nothing in comparison to instructing an attorney, and sitting down at home and going at it alone, even less. But the risk of your estate having to go through expensive litigation in order to determine your intentions set out in your home-made will is high – in fact, thousands of dollars higher than any professionally drafted will would have cost you.

With any legal document, such as the contract that may exist between you and your electrician, there is a possibility of misinterpretation. It is the same with a will, except for the obvious fact that at the very time a will is to be interpreted its writer is no longer alive to do so. As a result, the courts have developed very specific but helpful rules of will interpretation (and consequentially will drafting). Although, in certain circumstances, the application of these rules can be complex, most of them follow common-sense principles. But they are not all so obvious – such as the very specific rules and conditions for signing and witnessing a will or the words required to create an effective trust within your will or even the fact that a gift under a will can be made invalid if the beneficiary of that gift witnesses the will. These intricacies, coupled with the fact that the average writing aid is not based on Bermuda law, make the venture of home-made will writing a risky business.

From an estate planning point of view, writing your own will is simply not worth the risk – because the real question is not how much is a will going to cost me now, but how much is my will going to save (or cost!) my estate after I pass away. There is one particular Bermudian case that emphasizes this point exactly. In 1985 a retired police officer drafted his own will on a sort of DIY will form. Based on his hope that his third wife and his daughter from his first marriage would come to a mutual understanding as to the particulars, he requested, in very general terms, that his estate be shared between the two of them. It seems the obvious happened. The two never came to an agreement and the matter went to trial. In the end the supreme court judge did his best to uphold the retired police officer’s original intentions but not without making the very important point that, “If the intention of the [retired police officer] in using that Form was to save legal expenses, then that intention has failed…” I’ve been made to understand that the cost of that trial was upwards of $50,000.00. That was one expensive home-made will.

(with permission of Bermuda Sun)