Do I Really Need a Will?

Many people are unaware of the major benefits of making a Will, or the difference between buying a standard Will template as opposed to working closely with a lawyer to draft a tailored Will.

 

This article summarizes several out of many advantages of recruiting a lawyer to construct your Will.

old person concerned

 

Unnecessary Delays and Expenses if You Don’t Have a Will

The appointment of an Estate Trustee is crucial in distributing your assets in a smooth and efficient way. When you make a Will, you would choose a person to be this Estate Trustee. This person is usually a trusted family member or a friend, and this person can also be a beneficiary to the Will.

 

With a Will, the Estate Trustee may apply for a certificate of appointment with ease. Without a Will, there could be major confusion regarding who should become the Estate Trustee, especially if more than one person is competing for this position. This will likely lead to unnecessary delays and complications. Before an Estate Trustee is appointed, many types of assets would just be sitting there, unable to be distributed.

 

This is especially emotional draining if family members don’t have enough money to make funeral arrangements, and they cannot get access to estate money. Again, this is because without a Will, it’d likely take more time for an Estate Trustee to be appointed and more time to figure out the intentions of the deceased regarding how to distribute the estate.

 

Furthermore, if you don’t have a Will and passes away with assets that still have debts, such as a house with an existing mortgage, then the lenders would typically require the debts to be paid out before the house can be passed on to your beneficiaries. Sometimes, your estate may not have enough liquidated assets to pay off the mortgage, and the bank may take away your house and sell it in exchange for the mortgage. However, if you have a Will, you can choose to have the house pass on to your beneficiaries with the existing debts attached. Then, your beneficiaries may negotiate with the mortgagors to amend the mortgage terms (as ownership has changed) and continue to make monthly mortgage payments.

 

Intestate

When you passes away without setting a Will (“intestate”), then Part II of the Succession Law Reform Act (SLRA) would govern how your assets would be passed down.

 

Under this section, your married spouse would often get the lion’s share of the assets. The spouse would receive the “preferential share” of the estate, which is currently set at $200,000.00 as per Ontario Regulation 54/95 (1). This means that even if you have children, this $200 k would still go to the spouse. Now, if your net asset is less than $200,000.00, then the entire net asset would go to the spouse.

After receiving the $200 k, the spouse is further entitled to the following:

  • If there’s only one surviving child, then the spouse and child would each get 50% of the leftover assets;
  • If there are two children or more, then the spouse would get 1/3 of the leftover assets, and the 2/3 would be equally distributed among the children.

 

So, if you do not want the assets to be divided this way, it is wise to create a Will specifying how the assets should be distributed.

 

Gift Over – per stripes or per capita

When drafting a Will, it’s important to anticipate certain situations and make decisions in case they arise. A common anticipation is the unfortunate situation where your child passes away before you do.

 

In this case, you can distribute your assets in one of two ways. You can divide the assets per capita. Let’s say you have three children and one unfortunately passes away before you do. Then your assets, which were meant to split 3 ways between your 3 children, will now be split 2 ways between the 2 surviving children.

 

Or, you can divide the assets per stripes. Using the same example, let’s say you have 3 children and the child Sam unfortunately passes away before you do. You are still going to divide the assets 3 ways, with Sam’s 1/3 share going to his children equally.

 

Without a Will, the assets you are leaving to your children will automatically be divided per stripes according to s. 47(1)(2) of SLRA.

 

Estate Administration Tax

In Ontario, the lucky people who inherit assets do not need to pay tax on it. However, there is still Estate Administration Tax (ETA) which would be paid by the money in the estate. Subject to certain exceptions, the Estate Trustee would pay this tax as below:

  • For the first $50,000.00 of the estate — $5.00 per $1000.00 of estate value
  • For all estate value in excess of $50,000.00 — $15 per $1000.00 of estate value

 

A Wills & Estates lawyer would be familiar with the exceptions to ETA. In situations where there are many exceptions, it’s best to draft two Wills – one with assets subject to ETA and one with assets not subject to ETA. This makes the assets nice and clean for the adjudicating judge. As well, it may result in a significant amount of tax money saved, allowing more estate to be distributed to the beneficiaries.

 

Trusts


Often times, parents would to leave behind assets to their children but are afraid that they’d blow it all in one year… or even in a couple of weeks? Or the fear is that the children would spend it on a fun but wasteful trip across Europe rather than on their education or careers.

 

In those cases, parents may set up Trusts in their Wills to dictate how the money left to their children should be spent. For example, parents may decide that only a certain amount of money may be released to their children per year, to ensure they don’t spend all the money at once and having nothing left for the future.

 

A Wills & Estates lawyer can present various Trust options and properly draft them in the Will(s).

 

Power of Attorney

Another anticipated situation is when you become unconscious and/or loses the ability to make rational decisions. Often, you would want trusted family members to make decisions on your behalf in those situations.

 

When you still have a clear mind, you can decide who would make those decisions by creating Powers of Attorneys.  Under a general Continuing Power of Attorney, the assigned attorney may make any decisions that the grantor could make, except to make a Will.

 

There are two main types of power of attorneys. The power of attorney for property allows the attorney to make all decisions regarding the grantor’s property, including real estate property, assets held in a safety deposit box, bank accounts at financial institutions, etc.

 

The power of attorney for personal care allows the attorney to make decisions regarding nutrition, shelter, clothing, hygiene, safety, and health care on behalf of the grantor.

 

Of course, if you believe that this power is too broad, then you can instruct the Wills lawyer to draft restrictions. You may restrict the Power of Attorney’s decision-making powers to certain type of properties. For instance, you can dictate that the attorney may only give instructions regarding your real estate property.

 

Or, you can restrict the Power of Authority’s authority in time. Commonly, the power of attorney is set to not begin until the grantor becomes mentally incapable of making decisions.

 

Things may get troublesome if you don’t have Power of Attorneys in place and you became incapable of making rational decisions. In that situation, a family member, close friend, or someone else in your life may apply to the Court to become your Power of Attorney. However, if it’s unclear who is suitable to become your Power of Attorney, and there are more than one person competing for this position, things will likely get messy.

 

Also, if the Court determines there is no suitable person to fulfill this role, it may appoint a government official through the Office of the Public Guardian and Trustee.

 

Thus, to have more certainty, it’s more ideal to have Power of Attorneys in place.

 

Conclusion

In addition to those considerations, there are many other areas in Wills & Estates that are best handled by a Wills lawyer, such as foreign assets, corporate shares, leaving assets to adopted children, etc. Having a knowledgeable lawyer walk you through this process will help you better execute your wishes and avoid any unnecessary complications in the future.

 

This article is only meant to give general legal information. For legal advice on your specific Wills & Estates case, please consult a legal professional. 

 

Yi Dan (Sabrina) Ding 
Principal Lawyer 
Varity Law Pro. Corp. 
Tel: 416-477-5439 
Fax: 1888-620-4752 
Email: sabrina@varitylaw.ca
Address: 95 Mural St, Unit 600
Richmond Hill, ON, L4B 3G2
www.varitylaw.ca

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