Make a Will Q & A- Part II

Why should I care if I die without a Will?

Some people are concerned about what happens if they die without a Will. Some people are not. While each circumstance is different and family dynamics may bring into play other laws, I take this opportunity to summarize generally what happens if you die without a Will (in Ontario). I will also attempt to show why you should care!

The laws referenced in this article can be found in Part II of Ontario’s Succession Law Reform Act (1990).

QUESTION

How is my estate divided if I don’t have a Will?

Answer

Without a Will, your estate will be divided between your spouse (if you are legally married) and your children.

Without children, your surviving spouse inherits all of your property.

With one child and a spouse, your surviving spouse inherits the first $200,000 and the balance is divided between your spouse and child.

With more than one child and a spouse, your surviving spouse inherits the first $200,000 plus one-third of the remaining assets. The remaining two-thirds is then divided equally between your surviving children.

If you are unmarried and have no children, your Estate will be inherited by your parents.

If your parents have predeceased you, your surviving siblings will inherit your estate.

If you have no surviving siblings, your Estate will be inherited by your nieces and nephews.

If you are not survived by any nieces and nephews, your Estate will be divided between your next of kin.

Finally, without next of kin, the government inherits your Estate.

With a Will you can divide your Estate however you want. If you don’t have relatives you wish to include as beneficiaries in your Will, you can give your estate to charity, a friend or any other cause or person you choose, subject to obligations you may have to your dependent children or spouse.

QUESTION

Who will manage my estate when I die?

Why draft a Will? Can’t I just leave it to my adult children to figure out?

Answer

The Estates Act lists who can apply to be estate trustee if you do not have a Will that names someone. If you are married, your spouse or common law partner has the right to apply to manage your estate, followed by your children. If a person is separated but not yet divorced, or does not have the best relationship with their spouse or children, having them appointed may not be the best option.

Similarly, an Estate Trustee could be restricted from acting until a Certificate of Appointment has been granted by the Court; your assets may be tied up in the interim.

Adult children who disagree on how and who should manage their parents’ estate can lead to contentious litigation among family.

With a Will you can appoint anybody to manage and administer your estate, including a friend, advisor or institution. They are granted the power to act from your Will.

A Will, with the implementation of Trusts, acts to avoid family conflicts by maintaining a level of control even after you are no longer around.

QUESTION

What assets are covered by my Will and what will happen to my assets when I die?

Answer

Usually real property, bank accounts, investments and personal items are included in your Will, unless they are jointly owned or gifted in another Will. It follows that assets gifted under another Will and jointly owned assets are generally excluded from you Will.

Assets like life insurance, RRSP’s and TFSA’s can be excluded if a beneficiary designation is properly listed.

If your beneficiaries cannot come to a resolution about your property, the court may order that it be sold.   

With a Will you can determine who gets what and impose conditions as you see fit. With the use of Trusts, you can also leave it to one person during their lifetime and to another after that person dies or moves out.

QUESTION

I am leaving a significant sum of money to my minor grandchildren. What will happen to their inheritance while they are minors?

Answer

Without a Will the funds will go directly to the minor beneficiary, or to their parent/guardian if they are minors or unable to manage their own affairs. Without a parent, an accountant of the Superior Court of Justice manages funds for the minor beneficiary.

The funds cannot be managed in a trust without court approval.      

With a Will you can establish a specialized trust to be managed and paid out to your beneficiaries in a responsible manner, as you may decide.

If you have a disabled beneficiary, you can structure affairs to maximize social assistance and disability benefits.

QUESTION

What is a Trust? Why do I need a trust included in my Will?

Answer

A trust is a legal entity created by a person, known as the settlor, that appoints a trustee to manage property on behalf of beneficiaries, who will receive property in accordance with the terms of the trust. In the case of a Will, the testator is the settlor.

A trust is flexible and allows for a person to impose conditions on the timing of payments to beneficiaries. This avoids beneficiaries from having control over funds – a necessary structure if beneficiaries are young and or irresponsible. Trusts can also protect against creditors, preserve government benefits for a disabled beneficiary and preserve your estate for future generations. The possibilities in setting up a trust are endless, and so the terms of the trust must accurately reflect individual circumstances.

QUESTION

I want to draft a Will on my own. What are the issues to look out for?

Answer

The risks of drafting a Will on your own are endless. Estate planning documents that are executed without a lawyer run the risk of being unclear or invalid for not fulfilling the legal requirements as set out in the Succession Law Reform Act. Such Wills may not consider all the legislation and taxes relevant to your estate and may leave your last wishes unfulfilled due to failure to properly execute your Will. This could lead to contentious litigation, which is on the rise in Canada.

As wealth transfers to the next generation, care must be taken to recognize potential litigation, some of which includes: dependent relief claims, equalization of net family property claims, Will challenges based on capacity, undue influence, etc. Taxes should be considered when drafting your Will. Failure to be strategic about estate taxes can leave your beneficiaries with a large tax bill, which they may not be able to pay.

Other complicated factors when making a Will include but are not limited to dual citizenship, blended families, beneficiaries with special needs and other laws that need to be considered, depending on individual circumstance. Family law and real estate law often intersect with estates law and the Will making process.

As is evident, there are many factors that come into play when making a Will. Individual, family and financial circumstances are examined to construct an enduring, personalized estate plan.

An estate planning lawyer can help guide you by arranging your estate plan to be legally valid and lasting. Use an experienced lawyer to draft and execute your Estate Planning documents.

The general information on this page is not applicable to any specific case and is intended for information purposes only. It is not a substitute for legal advice and may not be relied on as such. Readers are expressly advised to consult with a qualified lawyer for advice regarding their specific circumstances and entitlements under Ontario law.