Penny Wise and Pound Foolish -The Problem of Not Doing a Will
People carefully throughout their lives gather assets looking to leave something behind for their loved ones. It can be tens of thousands, hundreds of thousands or a million or more dollars, but because of the cost of doing a Will, a carefully prepared Will that protects their loved ones and close friends, many people put off completing a Will until it is too late.
Instead, they subject their families to the in-fighting that can be caused by an Application to name an Estate Trustee (which used to be called an Administration) who is the person who is to carry out the obligations of the Estate as opposed to the deceased being able to decide who will administer their Estate and who will receive their assets through a Will.
A properly prepared Will is the greatest kindness, in a very stressful time that a deceased person can show their families. It allows the family to continue to run smoothly, pay their bills, deal with taxes, debts and other obligations and make sure that there is money for the spouse and children.
If there is no Will, then the widow receives the first $200,000 of the Estate, called the preferential share, and if there is one child, the widow receives half of the rest of the estate and the child receives half. If there is more than one child, then the widow receives her preferential share of $200,000 plus 1/3 of the remainder of the estate and the children receive 2/3 of the remainder of the estate.
With no Will, there could in-fighting among the family as to who should be administrating the estate, instead of the deceased person choosing someone who is responsible, careful and conservative to carry out their last wishes.
In an intestacy, the deceased does not get to decide how their estate is administered. The child who is a bit of a spend thrift and needs to have controls put on their spending, by having the money doled out over time will just receive the money. If they are over 18. There is no ability to put into place a spendthrift trust, or a guarantee that education will be the priority expense being paid or anything else. The money is just given. It does not matter that it could all be blown in a short period of time. If there is a Will then the money can be doled out over time and the Executor has the right to decide when, how and for what purpose the money is handed out.
An estate administration by the appointment by the Court of an Estate Trustee does not convey to loved ones how much they were loved, how much the deceased wanted to look after them, all of that ability to convey coping from beyond the grave is lost.
There are “Will Kits” out there, but there are strict rules as to how a Will is executed, in other words, where things are initialed, where things are signed, how many witnesses and the presence of two witnesses in the presence of each other, what their ages have to be etc. A “Will Kit” does not really help you there and if a Will is part written by hand, and part typed, there is a real problem with properly initialing each handwritten portion as opposed to a properly prepared lawyer drafted, typed. In a typed Will there is a requirement for two witnesses, neither of whom is the Estate Trustee (Executor) or a beneficiary. Each page must be initialed, the date must be initialed and the witnesses must sign beside the person making the Will’s signature. The problem with “Will Kits” is that it is often not clear how they should be properly executed nor is there any aspect of tax planning or estate planning as part of the Kit.
That is not to say that a Will cannot also be completely in handwriting which is known as a Holographic Will and is legal as long as it is dated and signed at the end, however, what should go in to the Will and how it should be worded is best left to the experts, not to a person trying to deal with all of their assets without any legal training.
People often do not think, when a life altering event occurs, that they should look at their Will and change it. The birth of a close family member, remarriage, separation or divorce require that a Will be looked at again.
On remarriage or on a first marriage any prior Will is automatically void unless it is confirmed by the new spouse or it is a Will done in contemplation of that particular marriage.
Imagine that you have left your entire estate to a former spouse, you never do a separation agreement and you never get divorced. That Will is binding. You may not have seen this person for 20 years, you may loathe them, but they suddenly became you beneficiary of everything. Unless you are divorced, or there is a full Separation Agreement (where each spouse waives any entitlement to the other spouse’s estate), they will inherit the entirety of your estate and again they may be your least favorite person in the entire world at the time that you pass on. The people you truly care about could receive nothing. This may include a new common law spouse and that spouse will be left to bring a Dependent’s Relief Application under the Succession Law Reform Act for support. What is left behind is an awful mess.
I strongly suggest that everyone reconsider their Will every 10 years. There is often a lot of water under the bridge every 10 years. Children get older and become capable of administering their own estates, certainly by the time they reach their mid or late 20’s. It does not help to have an elderly family member acting as Estate Trustee who may by that time be infirm. Every 10 years a Will should be carefully considered and either a codicil done or the Will completely redrafted.
There are also tax issues to consider. Where you can have direct designations of beneficiaries of certain assets such as RRSP’s, people often do not consider that while the asset may go to a beneficiary directly, the estate may have to pay the taxes on the transfer of the RRSP leaving barely enough money to pay debts and maybe no money for other beneficiaries. All of this needs to be talked through with a lawyer in deciding how to deal with the various assets of the estate.
People often do not name direct beneficiaries on their life insurance, instead naming their “Estate” as beneficiary. When there is no Will, who is it that they wish to receive the life insurance is the estate and are the people they would want to receive the life insurance actually going to receive it?
Many people regard the making of a Will as a ghoulish experience and many people put it off time and again. I hear about people in their later 80’s that do not have a Will. This is not a sensible approach to the realities of life and all of us are going to pass on eventually. If you have assets of any kind and are of the age of majority (18 in Ontario) you need to make a Will.