Trusted Wills and Estates Lawyer

This is the ideal set-up for many of our clients.

Mary:

• bought life insurance for her son, Manny
• set Manny as designated beneficiary to her TFSA and RRSP
• drafted a valid Will through our firm (Varity Law), using which she left everything else, which are her principal residence and several bank accounts, to Manny; there is a mortgage on her principal residence

Mary did not want to set Manny as joint account holder to her bank accounts, because at the moment Manny is added to her bank accounts, he can use the money immediately. What if he squandered all that money before she passes away?

After Mary passed away:

• Manny first got all the automatically transferred assets, which are life insurance, TFSA, RRSP
• Then he hired Varity Law to do a probate with will application for Mary’s house and bank accounts – since we drafted a valid Will and we are experienced with probate, he got the approval within one month
• With the Court approval (a certificate is issued), Manny got all the money in Mary’s bank accounts

With the real estate, Manny decided to do the tax-free way. He hired Varity Law to sell Mary’s property under her name, as the Estate of Mary. Since this is her principal residence, it was sold tax-free, and Manny received the money from the sale tax-free.

As well, the mortgage on the property could not be paid until the house is sold. Mortgage is an income-tested debt, meaning that it could not be transferred to Manny. Upon Mary’s death, Manny had to figure out a way to pay out all the mortgage immediately, not on a monthly basis. Luckily, Mary was smart enough to give him life insurance, TFSA, and RRSP. He used those money to pay out the mortgage and avoided the mortgage penalties.

With this plan, Manny got Mary’s estate assets in the most time-efficient and tax-efficient way, and he avoided any unnecessary penalties for the estate debts.

This is the hardest situation.

Gale passed away without a Will, and without setting any estate assets to be automatically transferred. His wife, Gabby, can only receive his estate assets by filing a probate without will application, which our firm completed for her.

However, because there’s no Will, specific people are entitled to Gale’s estate according to legislation, including two sons from Gale’s previous marriage.

Although Gabby has priority in becoming executor according to legislation, the Court prefers if all beneficiaries, including the two sons, can sign in consent. They refused.

As they could not be convinced, Gabby had to spend a lot of money and time buying a bond policy, which is very expensive and can cost 5% of the entire estate.

Also, as there was no Will or any information regarding what assets and debts Gale have, Gabby had to spend 6 months just finding out the details of his assets. During this time, all of his estate debts accumulated with interest penalties, and she frequently received mail demanding payment of estate debts.

Finally, after a gruelling year, the Court approved the application, and directed that Gabby must distribute Gale’s estate to herself and the two sons according to legislation (Gabby first gets the preferential share, which is currently set as $350,000, and then she gets 1/3 of what’s left, and the two sons equally divide 2/3 of what’s left).

Moreover, as there was also no tax-planning, Gabby had to pay the most expensive probate taxes and income taxes out of the estate funds first before she can distribute what’s left to herself and the two sons.

Moral of the story: setting some assets as automatic transfer and having a valid will is very beneficial. It will save a significant amount of money, time, and agony for your beneficiaries down the line.