Wills FAQs

Posted in: Wills and Estates Law- Dec 01, 2010 No Comments

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Why You Need a Last Will & Testament

Since we all will pass on, it is important that we prepare for the inevitable despite the common uneasiness of facing our own mortality. Legally speaking, one of the most important things to do is to make out a Last Will & Testament.  Having a Last Will & Testament drafted by a lawyer is a responsible measure to take. It allows you to achieve the following objectives:

1)  To provide for your loved ones when you are gone and to make sure that they are taken care of;

2)  To distribute your assets in the manner you see fit;

3)  To secure the efficient management of your estate, so that a family member who is ill equipped to handle the distribution of your estate is not left with the burden; and

4)  To avoid any subsequent and costly estate litigation and family bitterness or infighting that may result from the absence of a Last Will & Testament or a poorly drafted Last Will & Testament.

Dying Without a Last Will & Testament

Dying without a Last Will & Testament (intestate), the law, not you, will dictate how your estate is distributed.  And without a Last Will & Testament appointing an executor or executors to distribute your estate, the process of distribution can be a long and costly one. Below is an illustration of what can happen when a person dies intestate (without a Last Will & Testament).

Must a Last Will and Testament Be in Writing?

Yes. Governed by the Succession Law Reform Act, the creation of a Last Will and Testament must be in writing.

What is a Holograph Last Will and Testament?

A Holograph Will is one where the entire document is in the handwriting of the Testator (male) or Testatrix (female).

May I have More than One Last Will and Testament?

Legally speaking it is possible to have more than one effective Last Will and Testament but for the vast majority of people this is not recommended.

Who Inherits My Estate If I Die Without A Last Will & Testament?

If you die  without a Last Will & Testament, then your estate will be distributed in accordance with the Succession Law Reform Act, depending on the situation: a) If you die with an estate worth $200,000 or less and leave a spouse and children, then your spouse will receive the entire estate and your children will receive nothing. b)  If you die with an estate worth over $200,000 and leave a spouse and children, your spouse will receive $200,000.  The rest of your estate beyond that $200,000 is called the “residue” and will be divided between your spouse and your children and their direct descendants should any of your children predecease you. If you leave one child, then your spouse shall be entitled to half of the residue of your estate and to one-third of the residue if you leave more than one child. Therefore, if you leave one child, that child will be entitled to half of the residue of your estate and if you leave more than one child, then your children will divide amongst themselves the balance of the remaining two thirds of the residue of your estate. c)  If you die and leave children or grandchildren but no spouse, then your estate will be divided equally amongst your children or to their direct descendants should they predecease you. If you die without a Last Will & Testament and there are not any surviving spouses, children or grandchildren, then your estate will go to your nearest living relative.  The hierarchy of relatives, from nearest to farthest, is as follows: a) your parents;  b) your siblings and their children; c) your nieces and nephews; d) your next-of-kin; and if you die intestate with no spouse, children or next-of-kin, then your estate becomes the property of the Crown. As you can see, the system established for intestacy (dying without a Last Will & Testament) does not account for many scenarios, particularly if you do not share the statute’s automatic preference for  the spouse over the children.

It should also be noted that the Succession Law Reform Act definition of “spouse” does not include common law spouses, so dying without a Last Will & Testament would leave your common law spouse with no automatic legal entitlement to any portion of your estate. None of these rules apply to someone who dies with a Last Will & Testament. So by making a Last Will & Testament, you can decide exactly who inherits, who does not, and how your estate will be divided up.

When Can My Children Inherit My Estate If I Die Without A Last Will & Testament?

Without a Last Will & Testament, you cannot decide at what age your children or any other beneficiaries may inherit your estate.  If you die intestate and your children have reached the age of 18, they will be able to inherit immediately. If they are minors at the time, the portion of your estate to which they are entitled will be paid into court and held in trust until they reach the age of 18. Many children at the age of 18 are not mature enough to handle a significant amount of money.  With a Last Will & Testament, you can appoint a trustee to manage your children’s inheritance for them until they reach the age you specify.  Otherwise, without a Last Will & Testament, they will inherit at age 18, whether or not they are ready for it.

Who Will Manage My Affairs If I Die Without a Last Will & Testament?

Often times there are assets such as real estate or a business that are difficult to manage and to manage these assets is beyond the capabilities of your beneficiaries to manage. In a Last Will & Testament, you can designate an individual or a corporation to manage your assets on behalf of your beneficiaries so that they can reap the rewards of owning those assets without having to deal with the difficulties of managing them.

Appointing a trustee is also important in situations where you wish to leave assets to a person who is mentally disabled or otherwise incapable of managing their own affairs.  In a Last Will & Testament, you can designate a beneficiary and a trustee to manage the estate for that beneficiary.

If you die without a Last Will & Testament and your beneficiary is incapable, then you will not be able to ensure that your assets are properly managed for their benefit. Instead your assets will be paid into court and an application to appoint an estate trustee will have to be made. The possible administrators of your estate include: your spouse, your next-of-kin, a person selected by your spouse and/or next-of-kin, or the Public Guardian and Trustee.

How Long Will It Take To Administer My Estate Without a Last Will & Testament?

If you have not left a Last Will & Testament, the administration of your estate can be a very long and drawn out process, as numerous issues will need to be resolved through the Court system.  If you deal with these issues before your death in a Last Will & Testament, this will allow for a speedy and efficient distribution of your estate.

What Are The Tax Consequences of Not Having a Last Will & Testament?

The tax consequences of distributing your estate vary depending on the estate and the estate planning. However, death does trigger certain tax consequences, most notably the deemed disposition of certain assets and probate tax.

A deemed disposition means that for tax purposes, an asset will be deemed sold and your estate will realize the capital gain on that deemed sale. For example, if you bought shares in a corporation for $100, and at the time of your death those shares are worth $1,000, then for tax purposes your estate would realize a $900 capital gain on those shares and would be taxed accordingly.  The deemed disposition does not affect ownership of the shares.

Probate taxes work in the following manner:

ESTATE VALUE TAX RATE
$0-$50,000 $5 per $1,000 of value
$50,000 > $15 per $1,000 of value

The table above illustrates that probate taxes are equal to $5 per $1,000 of value for the first $50,000 of the estate and $15 for every $1,000 or part of $1,000 reported as the estate value over $50,000.

In a Last Will & Testament, a Wills Lawyer  can take estate planning measures to lessen the tax consequences of both the deemed disposition and the probate tax.  Without a Last Will & Testament, it is impossible to do so, and this will result in your beneficiaries receiving less of your estate and Canada Revenue Agency receiving more of your estate than is necessary.

As you can see above, there are serious adverse consequences to not having a Last Will & Testament, including an inability to properly provide for your children, unnecessary tax consequences and the inefficient administration of your estate. While this is not an exhaustive list of the shortcomings of not having a Last Will & Testament, it should serve to highlight the necessity of having a Last Will & Testament, properly drafted in consultation with or by a Wills lawyer on your behalf.

Toronto Lawyers