A Will is something that most of us should have unless our net worth is limited and we’re happy with the way the government mandates distribution between spouses, children and grandchildren (detailed below).
Any special inheritance wish will however need to be properly spelled out in a legal document, which takes effect when you die. Without a valid Will with detailed instructions, the result is often contentious with family members feeling that the deceased would have wished things to be different. This results in more grief and often family in-fighting.
For most of us a Will is a vital part of your financial plan that must be updated throughout our lifetime.
Canadian Will surveys over the past decade reveal remarkably similar statistics showing that approximately 55% of Canadians have a written Will. This is encouraging although still leaves many without clear direction of how to handle the distribution of assets.
Another key point is how old the Will is and whether it is still applicable to one’s evolving life situation and distribution wishes. A recent survey by Legal Wills suggests that about 12% of Wills are out-of-date, which bumps the number of people needing Wills (either new or amended) to well over half of Canadian adults.
So what do we need to do? First off, let’s understand the basics:
- Estate planning involves the transfer of someone’s assets (e.g. property, money) when they die, as well as a variety of other personal matters. Wills, estates, trusts and power of attorney are all common tools used in estate planning.
- A person’s will is a written document that sets out the person’s wishes about how his or her estate should be taken care of and distributed after death. It takes effect when the person dies.
- An estate is the property that a person owns or has a legal interest in. The term is often used to describe the assets and liabilities left by a person after death.
- A trust is created to hold property or assets for the benefit of a particular person called the beneficiary. It is managed by a person called a trustee, who has an obligation to deal with the property for the beneficiary of the trust.
The bottom quintile of Canadians net worth tops out at $206,765 (Environics Canada), which means that in the event of death for couples without a will, the spouse essentially inherit all the assets, which may not be the deceased’s wish.
This is how it works when a person dies without a valid will, called “intestate”, Ontario’s Succession Law Reform Act sets out how the estate is distributed.
- According to the Act, unless someone who is financially dependent on the deceased person makes a claim, the first $200,000 is given to the deceased person’s spouse if he or she has decided to claim his/her entitlement. The other possibility is to claim half of the net family property. A lawyer can help determine which is the better choice.
- Anything over $200,000 is shared between the spouse and the descendants (e.g. children, grandchildren) according to specific rules.
- If there is no spouse, the deceased person’s children will inherit the estate. If any of them have died, that child’s descendants (e.g. the deceased person’s grandchildren) will inherit their share.
- If there is no spouse or children or grandchildren, the deceased person’s parents inherit the estate equally.
- If there are no surviving parents, the deceased person’s brothers and sisters inherit the estate. If any of the brothers and sisters have died, their children (the deceased person’s nieces and nephews) inherit their share.
- If there are no surviving brothers and sisters, the deceased person’s nieces and nephews inherit the estate equally. However if a niece or nephew has died, their share does not pass to their children.
- When only more distant relatives survive (e.g. cousins, great nieces or nephews, great aunts and uncles), the rules are complex and you should speak to a lawyer.
- If any heir was alive when his or her relative died, but died before the estate was distributed, that person’s own heirs are entitled to their share.
- When a person dies without a will, only blood relatives, including children born outside of marriage, or legally adopted children can inherit. Half-blood relatives share equally with whole-blood relatives.
Going to a lawyer rather than drawing up your own will significantly reduces the risk that assets will not go to those you had hoped to benefit. This is especially important in today’s world in which we see more common-law relationships, blended families, and second or third marriages.
Some people simply opt for inexpensive ‘Will kits’ that may prove problematic particularly given the many blank spaces in these kits and how easy it is to make a mistake, which typically wouldn’t come to light until after you had died.
There are now also a number of online versions that serve many Canadians needs at a fraction of the cost, which may be suitable for your situation, but be sure to research your options and take the time to review the competitive offerings applicable to your province.
An advantage of these online services is that updating your will can be easily achieved, but the main attraction is the lower cost than a lawyer.
Our opinion is to be sure of all the angles and take advantage of our legal experts to discuss your needs and ensure that your Will is applicable for your needs despite a price premium. The financial peace of mind this delivers will be well worth the cost.
Regardless of the method you choose what’s important is to get your wishes properly documented and procrastinate no further.