1. You can determine where you want your property to go after you die.
If you die without a Will your property will be divided according to a statutory formula contained in the Succession Law Reform Act. Legally this is described as an intestacy and pays no regard to what you might have wanted to do with your property had you taken the time to make a Will.
For example: If you die without a Will and you leave no issue i.e. descendants, your spouse is entitled to all of your property absolutely. If you die intestate leaving a child, your spouse is entitled to a preferential share of $200,000 but must divide the residue equally with the child. If there are two or more children the spouse receives the preferential share of $200,000 and the spouse is entitled to 1/3 of the residue and the children the remaining 2/3 equally.
2. You can determine who can receive your property after your death.
The same statutory formula which determines how your estate is to be divided also determines who will receive it. The people who wrote the legislation did not know who your friends were or what charities you favoured so it created a ranking of your relatives. If you die without a spouse or any issue (descendants), then your estate goes to your parents. If you don’t have any parents then it goes to your brothers and sisters. If you have no brothers and sisters, parents, children or a spouse then it goes to your nieces and nephews equally. Where you have no living kin then your property goes to the Crown. This can lead to some rather unpalatable results. Let us say for instance that you inherit your late spouse’s assets which he/she inherited from his/her family. These assets now form part of your estate and will follow your bloodlines and not his/hers. This is unlikely to create great happiness amongst your former in-laws.
3. The government does not know who you want to manage your estate.
If you die without a Will you will not be able to determine who will take care of your affairs when you are dead. You may want your Uncle Charlie, the chartered accountant to be your executor but since you did not get around to making your Will your survivors will have to hire a lawyer to make an application to court to appoint an administrator. The court traditionally looks first to a surviving spouse to fill the role of administrator and failing that to the adult children of the deceased. The court will likely require a costly administration bond to be posted as security for the diligent and honest administration of your estate which will necessarily entail the preparation of a detailed set of accounts. The extra legal costs of obtaining the appointment of an administrator for your estate will be two or three thousand dollars at least and of course this is more than the cost of the Will that you never made. Uncle Charlie may yet get another chance to assist you because the formal passing of accounts will usually require the assistance of a chartered accountant. If you do not have an Uncle Charlie in the accounting business this will likely cost a few thousand dollars more.
4. If you die without a Will you will not be able to make special gifts to family or friends.
The government has no idea what you have or who you want to give it to. Your Royal Doultons will just go into an auction with all the other assets to be liquidated and distributed in accordance with the statutory formula. The niece you promised your ‘Purple Balloon Girl’ to will be very disappointed. You will not be able to leave special gifts for the education of your grandchildren. The formula does not know how much you want to give for their education nor does the formula permit a distribution to grandchildren if their parents are still alive. The same considerations apply to bequests of family heirlooms.
*The word heirloom is not found in the Succession Law Reform Act.*
5. The law of succession has a few flaws when it comes to defining a spouse.
It says that a spouse is the person you are still married to but unfortunately this includes separated but not yet divorced spouses. This may or may not be the person to whom you wish to leave your estate but if you do not make a new Will, he or she will be the person who receives the spousal share. The corollary to this is if you have previously made a Will in favour of your separated spouse it will probably be important to you to make a new Will as soon as possible so as to exclude that spouse from your estate. A divorced spouse is not a spouse whether you have a Will or not. Whether a Will is in existence or not family laws may create a property or a support right in favour of your children or your former spouse. It is important to have a Will which provides direction to your executor to handle these issues as this will undoubtedly facilitate the management of your estate.
Finally, it is worthy of note that if you have a common-law spouse such a person is not recognized as a spouse under the Succession Law Reform Act and has no property rights in the case of an intestacy. Therefore it is imperative to make a Will in order to provide for a common-law spouse by naming that person in your Will.
6. Second marriages introduce a whole new set of problems for your estate requiring that you make a new Will.
If you remarry, your Will is automatically revoked by statute unless you spell out in your Will that it was made specifically in contemplation of marriage to that person. This provides a very important reason for making a new Will as you try to balance your resources between your new spouse and the children of your former marriage. If your children are still dependant you will have to consider making adequate provision for them in your new Will. Now is the time to implement a plan to ensure the fair distribution of your estate between your old obligations and your newly acquired ones. Making a new Will is an integral step to mapping out the details which will create the least havoc among your successors.
7. The intestate succession rules do not deal with timing issues.
If you are eighteen years of age and a qualified heir under the Succession Law Reform Act you get your share right away. This precludes even the most rudimentary form of estate planning. Most people when they prepare their Wills try to stage the distribution of their estate to match the age and degree of maturity of their children. For instance, if you make a Will you will normally provide that your estate can be paid out to your children at different ages. A common plan is to deliver 1/3 of the share of a child at age 21, 1/2 of the remainder at age 25 with the balance payable at age 30. In this way your executor can exercise some care and control over your estate until your children are ready to receive the money you have left them. Your executor will usually also be given a discretion to encroach on the monies being held in order to pay for important items such as a university or college education instead of making the child wait until after they graduate.
8. Intestate succession does not answer to the requirements of a special needs beneficiary.
Mentally or physically challenged dependants may have increased expenses for housing, personal assistance or other unusual expenses. A Will gives you the opportunity to set aside funds and dictate the management of those funds for the benefit of the special needs heir by permitting the setting up of a lifetime trust for that child which will allow your executor to deliver money and assets from the trust so as to maximize the disability support available from the government.
9. Intestate succession rules treat all relatives of the same degree on an equal basis.
This may not be what you had in mind when planning your estate. One of your children may have won the lottery. Another may be a successful stock broker while yet another may be working as a missionary in India. Only a Will allows you to recognize the differences in your heirs and to treat them in an unequal way so as to match their needs and your wishes.
10. Last but definitely not least, the intestate succession rules do not recognize any charitable intent in the deceased.
The government has no idea whom you wish to benefit with a charitable legacy. Many people are motivated to make a charitable gift on death to recognize the attachments made during their lifetime such as their church or perhaps their university or college. Some people create gifts for hospitals where they have received excellent treatment for themselves or members of their family and they wish to recognize the care that their family members have received. The Lung Association is sponsoring a “Make a Will” campaign to encourage everybody to make a Will, one of the benefits of which is of course to allow people to exercise their charitable instincts. A generous gift can stimulate research to be undertaken to alleviate the suffering which is brought on by pulmonary disease which results in such a struggle for so many people on a daily basis.
An added benefit is the tax receipt which is a most useful planning tool in an estate because a deceased person is deemed to dispose of all of his or her worldly assets on the date of death and this may trigger a capital gain which is taxable or you may not know that your entire Registered Retirement Savings Plan or your Registered Retirement Income Fund falls into your income in the year of death. This creates a significant influx of income into your estate which is often two or three times the income enjoyed by the deceased during his or her lifetime. An effective charitable gift can help to solve this problem by reducing the taxable income of the deceased. There are many ways to leave a charitable gift each of which has advantages and disadvantages to the donor and the charity. Effective estate planning should include a review of your tax situation as well as your desire to leave a charitable legacy.
This guide was prepared by John Johnson
Wills and Estates Lawyer with Nelligan O'Brien Payne LLP