WILLS

Why we have wills: Wills make things much easier for the people we care about after we’re gone.

Benefits of a Will

With a will, the person appointed by you to be your estate trustee (we used to call them executors or executrices) becomes your personal legal representative immediately upon your death. He or she may still need to apply to court to obtain a Certificate of Appointment from the court. A Certificate of Appointment certifies to the whole world that the named person is your estate trustee and that the copy of the will attached to the Certificate is to be treated as your valid Last Will.

With a will, your estate trustee can do all sorts of things to administer your estate, such as obtaining your information from banks, lawyers, accountants, property managers or financial advisors, for example, before or without applying for a Certificate.

If there is no Will

If there is no will, no one can represent the estate until someone steps forward and applies to the court to be appointed the estate trustee. Without a will, the laws of Ontario will decide who inherits and what they inherit from you. Common law spouses, partners and friends will inherit nothing. Without a will, the laws of Ontario will determine who among your family will inherit.

When a Will may not matter

For certain types of assets, it won’t matter if there is a will or not. For example, if you own a house or another asset with someone as a joint tenant, that person will inherit your interest in that property upon your death (except in certain limited circumstances).

Or, as another example, if you hold title to a house or other assets in trust for someone else, and written evidence of that trust exists, your estate will be bound by the terms of the trust and that property will not form part of your estate, although your trustee will have to deal with it and follow the terms of the trust.

Also, if you have signed agreements, such as a child or spousal support agreements, or a commercial lease, or a guarantee of someone’s bank loan, or a shareholders’ or partnership agreement for your business, those agreements will usually specifically state that your estate continues to be bound by the terms you agreed to. Your estate may have debts or obligations arising out of these agreements after your death. Your will cannot cancel any of these obligations.

WE MUST BE MENTALLY COMPETENT TO WRITE A WILL

If a doctor and a lawyer after meeting with us don’t believe we have the competency to change a will, we cannot do so with any confidence that it will be enforceable. That is why lawyers will sometimes ask you to have a medical examination to obtain your doctor’s opinion as to whether you are competent to manage your own financial affairs at a time when you may be deciding to make significant changes to your will. For example, if you decide to cut one of your adult children, who you are not legally obliged to support financially, from your list of beneficiaries under your will, your lawyer may ask you to obtain a doctor’s opinion as additional evidence, beyond the lawyer’s own opinion, that you were competent at the time to make these decisions.

When we are writing our wills, we must keep this in mind, and plan for the possibility that we might become mentally incapable of lawfully rewriting the will in the future. Ideally, we want to know that the people named in the will to act as executors and trustees, and the gifts we are making in the will, are choices that we will be comfortable with, if we don’t change the will in the future, no matter what might happen to us in the future.

Which assets to deal with in a Will

As part of many lawyers’ estate planning with clients and their accountants, we routinely consider each of your assets: what you own, how you own it, the plans you have for that asset, its significance to your family or friends, and what you would like to have happen to that asset when you die.

Transferring assets before death

Sometimes it can make sense to transfer assets before death. Sometimes we transfer assets into a trust, perhaps for your family, perhaps for you alone, perhaps for you and your spouse or partner. Sometimes we transfer both assets and debts to a family controlled corporation. Sometimes we set up a trust within a will, which will take effect on your death. Sometimes we transfer title to specific assets to family members. However that creates tax and liability issues for you and for the family member. It also can create problems respecting control of the asset; you will often need someone else’s permission (signature) to deal with the asset; it often is no longer yours to control alone.

Reducing provincial estate administration fees

Transferring assets before death does reduce potential provincial estate administration fees (called probate fees in the past). However those fees are a maximum of 1.5% of the value of the assets; it doesn’t always make sense to change ownership of the assets during your lifetime simply in order to save your beneficiaries 1.5% later on.

Multiple Wills

Multiple wills can also be used when it is appropriate to do so. We don’t usually recommend it unless we are able to save at least $7,500 in provincial estate administration fees after your death, because multiple wills are complicated to create and to understand, and must be created very carefully.

None of these procedures make sense unless the financial savings are significant. For example, a trust has to file its own trust returns with Canada Revenue Agency (called Revenue Canada in the past) each year. The additional yearly accounting fees can be significant, and the costs of setting up the trust and transferring all of the assets into it can also be significant.

WHAT TO SAY IN A WILL

Executors and Trustees

First of all, choose the best person or people to act as your executor and trustee. Usually your spouse or partner is the first choice. If not, then one or two responsible adults, possibly children, friends or colleagues, should be chosen. Only name several people together if you are sure they will work well together. If they don’t get along well now, they probably will not do so when administering your estate.

It is always wise to name a second choice as a back-up in case your first choice has died or is otherwise unable or unwilling to act as your executor and trustee. Sometimes it makes sense to name someone outside the family to act as the executor and trustee. Sometimes it makes sense to use a trust company to act as the executor and trustee, either as the first choice, or as the back-up alternate choice.

Beneficiaries

Decide to whom you want or need to give specific items you currently own, or shares, percentages or portions of your estate. Beneficiaries can be any combination of people, animals, corporations, and charitable or other organizations.

Specific Gifts

Are there specific items that must go to specific people, whether inside or outside the immediate family? Do you want to leave a list? Do you want to list them in the will? Do you want to name someone else to dispose of certain items? If that person can’t do it, do you have a second choice?

Charitable Gifts

Are there any charities or religious institutions you wish to support upon your death (there will be a tax benefit for doing so for your estate’s use on your final tax return). There can be significant tax savings from planned giving of valuable items. These can be profitably donated during your lifetime for significant tax benefits and can also be donated in your will, giving your estate a tax benefit.

Other Organizations

Are there any organizations that you wish to support that are not registered as charities in Canada. You can give whatever you wish to them, as long as they are properly named in your will, but there will be no Canadian tax benefit to your estate for doing so. Decide if you want the gift to go elsewhere if the organization doesn’t exist under that name when you die.

Individual people as beneficiaries

Is there anyone whose inheritance must be placed in trust, for his or her own protection?

If that person does not survive you, what happens? When that person dies, after surviving you, where will the rest of the trust monies (if any) go?

Do any of the individual beneficiaries live outside of Ontario?

Are any of them married, or in common law or same sex partnerships?

If a beneficiary dies before you, where does his or her share of your estate go?

Under-age Children

Are there any under-age children involved?

If so, at what age do you want them to inherit?

If they die before that age, having survived you, who gets the rest of the share?

Are there children you should consider adopting legally?

If any of your own children are under age, who is your first choice to act as guardian, and who is your second choice?

Family members who must be excluded

Are there people in your immediate (or extended) family you wish to exclude so they cannot inherit anything from you after your death under any circumstances? Although this is not common, it is lawful in Ontario to do so, in certain situations.

Debts or loans to be repaid to your estate

Are there family members or friends whom owe you money that you want paid back by them to your estate if you die before they do, or if you die before they pay you back?

Are there debts you want forgiven upon your death?

Obligations to support others

Are there people you support financially now, who you want to support after death; or who may have a legal right to claim support from your estate (such as a financially dependent common law spouse or dependent children or some other person you are financially supporting at the present time)?

Moral Obligations

Have you promised anything to anyone upon your death? Remember, there are rarely any right or wrong answers to any of these questions, but they do need to be answered when writing a will.
 
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