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What does a will accomplish?
Although everyone has good intentions, far too many
people die intestate, that is, without having made a valid will.
A will is the legal document that details the process for distributing
one's assets (the estate) in a timely, orderly and tax-efficient
manner. Perhaps most importantly, a will documents the manner in
which the individual intended to have the estate administered.
There are two main purposes of making a will.
The first is to document the intentions of the testator, the person
making the will, as to the choice of beneficiaries, recipients of
his/her assets. The second is to appoint the executor (also known
as a liquidator in Quebec and an estate trustee in Ontario), whose
role is to ensure creditors of the deceased are paid and to disperse
the deceased's assets according to his/her will.
Why do I
need a will?
Anyone who has a spouse or children, or is simply concerned with
how his/her property will be distributed after his/her death should
make a will. There are "do-it-yourself' kits and software packages
available in most office supply stores however, we recommend getting
the help of a legal adviser if your estate is anything other than
simple. Bear in mind that what you may assume is a simple estate
may have legal complexities that can- not be properly addressed
without legal advice.
The estate of someone who has sizable assets
and dies intestate can be complicated, and may demand going to court
before the assets can be distributed. Without a will, personal property
(anything other than real estate) will be distributed according
to the intestacy laws of the province in which the testator was
domiciled when he/she died. Real property will be dealt with based
on the intestacy rules of the province in which the property is
located. Minor children will be placed under the care of a guardian
appointed by the courts. If some family members have special needs,
they may not receive the same priority by the courts as the testator
might wish.
Without a will, you cannot appoint the person
who will take care of your estate - the court will make the choice
for you.
The time taken by the court to appoint an
administrator to act on behalf of your estate will cause a delay
that could trigger cash-flow problems for your heirs. Keep in mind
that until an appointment is made, no one has the legal authority
to touch your estate.
Dying intestate can result in needless taxation
and possibly estate administration fees, especially if you neglected
to do any estate planning. This results in less of your estate going
to your beneficiaries, and more to the federal and provincial governments.
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EXAMPLE:
John was 42
when he was killed in a fatal automobile accident. He left a
wife and two children and an estate valued at $500,000. John
and his wife Sara were joint tenant owners of their home in
Calgary. John had neglected to make a will. After John and Sara
had married, John had thought about naming Sara as the beneficiary
on his Registered Retirement Savings Plan (RRSP) and changing
the beneficiary on his life insurance policy from "Estate"
to Sara, but had never followed up
Because of the joint ownership, Sara becomes the sole owner
of the family home, worth $275,000. For the same reason, Sara
also becomes sole owner of the joint bank account (which has
a balance of $2,000). Instead of John's RRSP being rolled into
an RRSP for Sara as the surviving spouse, a special election
would have to be filed to permit the RRSP to be transferred
tax-free to her. The life insurance policy is redeemed and the
$50,000 forms part of John's estate. Although the $50,000 is
not subject to income tax, the RRSP and the proceeds of the
life insurance policy are included with John's bank accounts,
and other personal assets (totaling $73,000) in the calculation
of probate fees.
Additional court costs for naming an administrator to handle
the estate further reduced its value. If John had done some
estate planning and prepared a will, Sara would have inherited
everything directly and avoided the additional court costs,
as well as probate fees |
What
if I die without a will (Intestate)?
The
following chart outlines the current distribution rules. The preferential
share is the amount that would be distributed to the spouse before
any other calculations are made.
| Provincial
Intestacy Rules (current at May 31, 1999)
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| Province
|
Preferential
Share (after debts are paid) |
Spouse+
1 Child Remaining Assets |
Spouse
+ 2 Children
Remaining Assets |
| British
Columbia |
$ 65,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Alberta |
$
40,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Saskatchewan |
$100,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Manitoba |
$
50,000 |
1/2
to spouse
1/2 to child |
1/2
to spouse
1/4 to each child |
| Ontario |
$200,000 |
1/3
to spouse
2/3 to child |
1/3
to spouse
1/3 to each child |
| Quebec |
$
Nil |
1/3
to spouse
2/3 to child |
1/3
to spouse
1/3 to each child |
| New
Brunswick |
$
Nil |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Prince
Edward Island |
$
50,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Nova
Scotia |
$
50,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Newfoundland |
$
Nil |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Northwest
Territories |
$50,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Nunavut |
$75,000 |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
| Yukon |
$
Nil |
1/2
to spouse
1/2 to child |
1/3
to spouse
1/3 to each child |
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*
At this time common-law spouses are not entitled to preferential
share under an intestacy |
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What
should be in a will?
A will must clearly state the intentions of the testator in language
that is easily understood by those responsible for administering the
estate. A confusing will can be as ineffective as no will at all.
Even simple instructions can take a number of pages to express them
in the correct legal terms. It's impossible to describe here the clauses
that could be relevant in every case since every individual's situation
is unique and requires "custom" advice. For information
purposes only, here are some commonly used will clauses.
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IDENTIFICATION AND REVOCATION. |
- Identifies
you and often your domicile. (Your usual residence called
"domicile" by the court decides under which provincial
laws your estate will be administered.)
- Declares
that this document is your last will and that all prior
wills and codicils are revoked (may not be included in situations
of multiple Wills).
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APPOINTMENT OF EXECUTOR(S). |
- Designates
the individuals or institutions) you appoint as your executor,
either individually or as co-executors (co-trustees).
-
A successor or alternate executor may also be designated
to act if your original choice of executor is unable or
unwilling to accept the responsibility.
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PAYMENT OF DEBTS, TAXES AND FEES |
- Instructs
your executor to pay all debts (mortgages, loans, funeral
and estate administration expenses) out of the estate.
-
Authorizes your executor to pay income taxes or probate
fees. *Not applicable in Quebec (called estate administration
tax in Ontario) that may be payable.
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SPECIFIC BEQUESTS |
- Details
the distribution of specific personal property to specific
beneficiaries.
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| LEGACIES
|
- Details
the distribution of specific cash amounts.
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| LIFE
INTEREST CLAUSE |
-
Leaves someone the income or the use and enjoyment of an
asset, but not the ownership of the asset itself. On the
death of the person holding the life interest (called the
life tenant), the asset would pass to another beneficiary,
chosen by you, and identified in your will. In Quebec, this
would be an "usufruct."
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| TRUSTS |
- Sets
out the terms of any testamentary trust(s) (i.e., a trust
created on the death of the testator) created by your will.
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| ENCROACHMENT
CLAUSE |
-
Used in a trust if you want the trustee to be able to give
the beneficiary of the trust additional funds for special
circumstances or needs.
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RESIDUAL ESTATE |
- Details
the distribution of your remaining property after all of
the specific bequests have been made and all legacies have
been paid.
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COMMON DISASTER / SURVIVOR CLAUSES |
- Details
the distribution of the assets if intended beneficiaries
die at the same time you do, or do not survive you beyond
a set period of time (often 30 days). Also details the dispersal
1 of assets if intended beneficiaries die before all trusts
are terminated.
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GUARDIAN APPOINTMENT |
- Names
the individuals) whom you appoint as guardians) (called
a tutor in Quebec) for Your minor children. (In Ontario,
this is an appointment valid for 90 days, after which the
court determines what is in the best interests of the children.)
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POWER CLAUSES |
-
Empowers your executors) to exercise various powers (choice
of investments, decision-making powers, etc.) in the management
of your estate without having to obtain court approval.
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TESTIMONIUM AND ATTESTATION |
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Formally confirms that you have read and understood the
contents in the will, records when and where the will was
signed and that witnesses were present at the time you signed
the will.
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What
makes a will valid?
There are certain requirements to ensure that a will is valid. Generally
the testator cannot be under the age of majority and must have the
mental capability to understand what he/she is doing ("of sound
mind"). The testator must sign the will in the presence of two
witnesses who are neither beneficiaries of the will nor spouses of
beneficiaries. These two witnesses must sign the will in the presence
of each other and in the presence of the testator. A will may also
be valid if written entirely in the handwriting of the testator (not
on a computer). This type of will (called a holograph will) requires
only the signature of the testator. No witnesses are required. This
type of will is not recognized in all provinces.
Need
to make a minor change in your will?
A codicil
is a document that is executed and validated like a will. It can amend
a will by revoking or changing an existing clause, or adding a new
clause. Just like a will, a codicil is dated and must be in the testator's
handwriting, or must be signed by the testator in front of two witnesses.
If many changes are being made, one should draw up a new will rather
than repeatedly amend the old one.
Purpose of
a will
Just as in common-law provinces, a will in Quebec documents the
wishes of the testator about whom he/she wants his/her property
to go to and what property each person will receive. The will also
names the liquidator of the succession (called the executor or estate
trustee in other provinces), whose duties will include identifying
the heirs and legatees and distributing the property of the deceased
according to the will. The will may also name a tutor to a minor
child (known as a guardian in other provinces).
Beware
of family law issues
In some circumstances, your estate or the succession may not be
divided exactly as you wanted. All provinces have family law legislation
(family patrimony in Quebec) that deals with the division of assets
acquired during a marriage in the event of its breakdown. The legislation
may also extend to the division of assets on the death of one spouse.
In Ontario, for example, the surviving spouse is entitled, broadly,
speaking, to one-half of the increase in value of assets accumulated
during the marriage (with sonic exceptions). If the deceased spouse's
will provides less than this to the surviving spouse, he/she may,
by law, demand an equalizing payment from the estate. Other provincial
laws may allow a spouse, child or other close family member who
was financially dependent on you during your lifetime continued
support from your estate, even if you intentionally omitted that
person from your will. Your lawyer or notary should be able to explain
your rights and obligations under the applicable legislation and
recent court decisions that may affect such legislation. In the
case of common-law or same-sex relationships, provincial legislation
should always be reviewed with your lawyer or notary.
GETTING
ADVICE: A will requires careful planning to ensure all
essential matters are covered. It should also be reviewed periodically
and discussed with a qualified adviser or team of advisers to incorporate
any changes in your personal circumstances.
We
gratefully acknowledge this article from Trimark Investment Management
Inc.
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Learning Centre -
Estate Planning
