The view from Toronto

01 May 2013 Margaret O’Sullivan

The view from Toronto

STEP's worldwide Deputy Chair Margaret O'Sullivan talks to Sally Percy about FATCA, federalism and future trends.

‘We live in a virtual world,’ says Margaret O’Sullivan, STEP’s worldwide Deputy Chair. As if to prove the point, she’s speaking to the STEP Journal from her Toronto office via the thoroughly 21st-century medium of Skype. ‘Technology has made the world more cohesive,’ she continues. ‘Bricks and mortar aren’t going to mean as much in future. The notion of domicile might become an anachronism. People may have a more diverse lifestyle with more than one home and centre of life. Defining domicile based on geographic place is a relatively 19th-century concept.’

O’Sullivan might be spot-on about our increasingly peripatetic society, but sadly the world’s tax authorities haven’t quite caught up with her thinking. Thousands of Canadian residents have been caught by the US Foreign Account Tax Compliance Act(FATCA) without even being aware of it. More than a million people living in Canada are thought to be US citizens, whether they know it or not. In some cases, this can be by virtue of merely having a US parent, or a US parent who, unbeknown to them, registered them as a US citizen at birth – or perhaps they were just born in a US hospital. The Act requires US citizens with specified foreign financial assets over certain thresholds to report those assets to the Internal Revenue Service. The effects on these ‘accidental Americans’ can be dramatic. ‘It is difficult for clients to accept the reality of the US regime – where they are, in fact, a US citizen,’ O’Sullivan says. ‘And it’s expensive, too. To get one’s affairs in order, one has to file a variety of tax returns and other forms to be compliant.’

US estate tax, based on a person’s US taxable estate on death, has highlighted similar issues. This is because Canadians who own USsitus assets, including many who have US vacation homes or shares in US companies, are exposed to US estate tax along with those who are US citizens.

A growing challenge for trust and estate practitioners in Canada is navigating the laws and taxes of their southern neighbour. Practitioners need a reasonable working knowledge of US law on trust and estate issues, says O’Sullivan, ‘otherwise they cannot give appropriate wealth advice, including advice on will planning’. But it’s not just US rules that they need to be aware of. They also need to be able to find their way through the 13 jurisdictions that exist in Canada itself and know how these affect succession, which is a matter of provincial jurisdiction. They also have to contend with two legal systems (Quebec has civil law while the rest of the provinces use common law) and two official languages – English and French – as well as tax law at both the federal and provincial level. ‘Inter-provincial conflict of laws is interesting and challenging,’ O’Sullivan muses. ‘But the Canadian mindset is not unitary. We’re always thinking bilaterally and federally across many different jurisdictions, about how to put those different pieces together.’ Then there are the huge geographic distances to take into account. ‘We have developed ways of dealing with them, primarily related to communication,’ says O’Sullivan. ‘Canadians are the biggest users in the world of the internet and, historically, they have been the biggest users of the telephone.’

Practice progress

For O’Sullivan, trusts and estates practice was a logical progression after she received a bachelor of laws at Queen’s University law school in Ontario and served articles at Toronto law firm Osler, Hoskin & Harcourt. She was first exposed to the area of estates during her articles. ‘I thought it was very interesting,’ she recalls. ‘It was also an issue of what didn’t I want to do? I wanted a file where there was a real person, not a corporation.’ So after passing her bar course, she returned to Osler in 1983, where she joined the estate group as a first-year lawyer. In 1986, she moved to the Toronto office of Stikeman Elliott, where she established its trusts and estates practice and was made partner in 1989. Then Stikeman Elliott’s Toronto office became more transaction and business-focused, rather than a general service law firm. So in 1998, O’Sullivan started a boutique trusts and estates practice, believing that it better suited her expertise in serving high-net-worth clients. She maintains good relations with Stikeman Elliott, however, and partners with the firm on many matters.

This year marks several milestones for O’Sullivan: she is celebrating her 30th year at the bar, as well as the 15th anniversary of her firm. To cap it off, she will be honoured by the Ontario Bar Association as the 2013 recipient of the Award for Excellence for Trusts and Estates.

Seven professionals work at O’Sullivan Estate Lawyers, including O’Sullivan herself, and she also employs part-time staff and contractors. When you run your own practice, you ‘essentially trade one set of problems for another’, she observes, but while it’s hard work running a business, she believes the positives easily outweigh any negatives. Her history with some of her clients stretches back to 1986, and she enjoys the satisfaction of those long-term relationships. ‘That’s one of the rewarding aspects of this area of practice,’ she explains. ‘You get to see your clients over and over again and be involved with them through many times of their lives, sometimes very difficult times. It’s interesting and very satisfying to have these connections and to see how their lives are progressing.’

She also believes that a boutique practice enables her to offer the best possible client service, since she has the independence and freedom to dedicate all the resources of the firm to trusts and estates. Besides multi-jurisdictional issues, her clients are concerned with what she describes as ‘the challenge of new wealth and too much wealth’, so she spends a lot of time advising clients on how to ensure ‘a successful succession’. There is a growing focus on philanthropy – if and how that should be integrated into an estate plan. Meanwhile, the problems associated with an ageing population, including vulnerability and incapacity, will be ‘the major new realities’ for trust and estate practice, she says, and cause fundamental changes. ‘We are on the cusp of a tsunami in this area.’

The STEP connection

Another long-standing relationship that O’Sullivan cherishes is her involvement with STEP. She first heard about the Society in the early 1990s and was one of the founding members of the Canadian branch. ‘My membership number is in the 800s,’ she says, ‘so that tells you something now that we’re almost hitting 20,000 members.’ STEP took off rapidly in Canada from its inception in 1998, and O’Sullivan says this has much to do with the way it was rolled out. ‘It was top-down growth, very strategic, very focused and very well executed,’ she explains. ‘The plan was based on major Canadian cities with a high population.’

Branches were established in Toronto, Ottawa, Montreal, Halifax, Calgary, Edmonton, Winnipeg and Vancouver. Each branch created its own programme for the year and carried out local education initiatives. The model was federal, to match Canada’s own governance, and a national coordinating body – STEP Canada – was set up to act as the glue for STEP throughout the country. A national conference was also created, along with a newsletter aimed at Canadian STEP members, called STEP Inside. O’Sullivan, a keen writer, launched this initiative and was chair of the Editorial Board. Proof of STEP’s success at taking root in Canada lies in the strength of the membership there – it now boasts almost 2,000 Canadian members and has its own diploma programme with nearly 300 students, while the Canadian national conference is one of the largest in the STEP community. Canadian members also helped to drive the growth of STEP USA, since many of them supported the project and helped to promote it. As O’Sullivan puts it: ‘To be the pre-eminent worldwide body for trust and estate practitioners, it is imperative to have the largest trust jurisdiction in the world as a major player in the organisation.’

Next STEPS

What should STEP do next? Worldwide Deputy Chair Margaret O’Sullivan believes that the Society will need to have a deeper interface with civil-law jurisdictions around the world and grow its presence in the US and Latin America.

STEP’s roots lie in what O’Sullivan describes as ‘being a provider of primary education through its diploma programme’. But she adds: ‘Responding to the needs of professionals at every level in their career is the challenge and we’re on our way to doing that.’ The Society needs to keep developing its certificates in special subject areas, she says, and nurture the Special Interest Groups that are being formed, while making the best use of technology to do so.

Then there is raising the profile of the trust and estate profession as a distinct area and increasing awareness of the priority of personal planning among clients and the public. ‘I think we can play a role in breaking the silence and demystifying it,’ O’Sullivan reflects. ‘Death and planning are a taboo subject for some, but for all of us it is an important matter of individual personal responsibility to make sure that we have our affairs in good order.’

O’Sullivan has held a string of responsibilities with STEP, including serving on the Canadian national executive and being a Deputy Chair on STEP’s worldwide Council, which she joined in 2003. She was elected to the Board in 2009, sat on the management and finance committee before the establishment of the Board, and has chaired the professional standards committee. She was elected worldwide Deputy Chair in 2012. When asked whether she sees becoming Chair as the next job, she replies: ‘It’s the will of Council to decide who becomes Chair, but it would be an interesting position.’

STEP has made a massive contribution to trust and estate practitioners’ ability to network with their peers around the world. ‘There’s no question that STEP has caused this entire practice area to become more cohesive and focused at every level,’ says O’Sullivan. The fact that it’s multidisciplinary also makes it distinctive. She points out that practitioners previously operated in silos according to whether they specialised in trust and estates, tax or insurance. ‘STEP was the catalyst that caused all those competencies to coalesce,’ she explains. She also highlights the role of STEP in furthering members’ professional development through its education programmes.

Canada is famed for its landscape, and O’Sullivan admits to loving the outdoors. Skiing, sailing, canoeing, biking – you name it, she does it. But her life outside work doesn’t entirely revolve around wholesome activities – this technology lover from Toronto has another hobby as well. ‘My children tell me “You’re always on your iPad”,’ she says with a smile. ‘I like to surf the net.’

Authors

Margaret O’Sullivan

CPD Reflective Learning