Will Power

If you have procrastinated in making your Will you’re not alone.  A recent survey sponsored by the Canadian Bar Association revealed that less than 50% of Canadians have a Will.  This statistic is surprising considering that in most cases the cost of a Will is insignificant relative to the size of your estate.  Now is the time to give yourself peace of mind and make a Will.  Here’s why:

Freedom to Choose

A Will gives you the freedom to choose who will benefit and who will not.  If you die without a Will, Provincial legislation dictates who gets what from your estate and in what proportion.  For example, if you are survived by a spouse and children, your spouse may not get everything upon your death.  Where your estate is valued at more than $350,000, your assets must be split between your spouse and your children, and the division is not equal.

Ability to Provide for your Children

A Will looks after your children.  If you die without a Will and you have children under age 18, the Court decides who will look after them.  In addition, your child’s inheritance will be held by the Court until your child reaches age 18 at which point your child will be entitled to the entire inheritance.  Further, without a Will your child’s inheritance could only be invested in investments listed in the Trustees Act, which at the moment excludes mutual funds.  More importantly, many children would not be mature enough to manage an inheritance properly at age 18.   In your Will you could provide that your child’s inheritance is to be held in trust beyond age 18.  For example, you could specify that each child is to receive ½ of their inheritance at age 21 and the other ½ at age 25, with your executor having the ability to provide payments, in the interim if necessary, for education and support purposes only.

Ability to Reduce Taxes

With a Will you are able to ensure that your estate is passed on to your beneficiaries in the most tax efficient way possible.  For example, the federal government recently enhanced the tax rules affecting certain types of charitable gifts.  Your Will can facilitate these charitable gifts and at the same time reduce your income tax liability at death.

Trusts are another excellent tax planning vehicle easily implemented through your Will.  A trust created in a Will can allow for income to be split among family members thereby reducing the overall tax bill related to such an inheritance.

Ensuring Your Plan Works

While it is true that even without a Will the proceeds from a life insurance policy and retirement savings plan will be paid directly to the beneficiary named in the policy/plan itself, unless you have a Will, you cannot control what happens to these proceeds where the named beneficiary predeceases you or dies with you in a common accident.  You should have a “backup” plan of distribution in your Will that ensures the plan benefits are paid to the right person or persons and not left for the Court to decide.

Avoid the Extra Costs and Delays

If you do not have a Will when you die your loved ones must hire a lawyer and commence a Court proceeding to have someone appointed as your estate’s representative.  This appointment could take months to complete and your assets will be frozen for at least one year.  Your estate must also pay the Court for its work.  The Court’s fees (commonly known as “probate fees”) are about 1.5% of the entire value of your estate.  The Court appointed representative must also provide the Court with a surety bond unless a Judge agrees to dispense with the bond requirement, which is determined on a case-by-case basis.  In an estate worth $300,000 this bond would cost about $1,400 annually.  Finally, your estate must hire a lawyer to coordinate all of these steps.

In summary, not having a Will often means your estate will pay more income taxes, probate fees, legal and insurance fees, and your estate representative and beneficiaries will have to endure unpleasant delays in sorting out your estate’s affairs.

Even if you have a Will

For those of you who have had a Will professionally prepared, be sure it still satisfies your current wishes.  Has it been updated to reflect the current laws in Ontario?  Are you taking advantage of the tax benefits associated with spousal and family trusts? Do you know what assets will make up your estate and who will be responsible for your income taxes?  (Your RRSP, life insurance and property held as joint tenants with the rights of survivorship are treated differently). Have you planned your affairs in order to avoid paying unnecessary probate fees?  Are you aware of the effects of separation, divorce or re-marriage on your Will? It is important to have a legal professional examine your Will to ensure it is conforming with changes in the law, and still is carrying out your wishes in the most tax-efficient manner possible. 

What Happens if you get a Divorce? 

Due to recent changed to Ontario’s Succession Law Reform Act, Divorce will now have a substantial impact on your existing Will. With these new changes a divorce will now nullify any bequest made to your former spouse in the will, void their appointment as an executor or trustee, and void any special power of appointment given to them. Essentially your Will is to be read as if your spouse had predeceased you. If you have been divorced or are planning to it is strongly suggested you revisit your Will. 

What Happens if You Marry After Creating a Will? 

Prior to January 2022 an existing will was revoked by marriage. New changes to Ontario’s Succession Law Reform Act now provide that a marriage occurring on or after January 1, 2022 will not revoke an existing Will. Just because the law has changed on this point, those married prior to January 2022 will not be affected by this provision. If you created a Will and were subsequently married before January 2022, you should be aware that your Will was revoked. If your Will was revoked by this provision, you should consider have a new Will drafted or reviving your old Will to ensure your wishes are still followed.

What Happens if You Become Ill?

Having a Will helps avoid family disputes over your property. A Will gives you the peace of mind and comfort of knowing your affairs are in order and your loved ones will be looked after without Court involvement.  However, remember that your Will only speaks after your death.  If you become ill and unable to look after your assets then your loved ones will face similar problems to those discussed about when trying to deal with your property.  In most cases, your spouse does NOT automatically step in and take over your affairs until you are well, rather, a government office known as the Public Guardian and Trustee (“PGT”) becomes your asset manager.  In order to remove the PGT as Guardian of Property, a proceeding must be commenced in the Ontario Court to appoint your spouse or next-of-kin to manage your assets in accordance with a detailed management plan. This not only creates unnecessary delays, it will result in significant costs.  To avoid these problems, you should speak with your lawyer and consider signing a Continuing Power of Attorney before you become ill.

Taking a bit of time today to ensure you have an up-to-date Will and Continuing Power of Attorney can save your loved ones from time-consuming, expensive, and stressful court proceedings later. 

Executing a Will & POAs has Become more Accessible with a Virtual Witnessing Option

Executing a new Will or changes to an existing Will has become easier than ever thanks to the newly introduced Ontario Regulation that allows for remote witnessing for Wills & Powers of Attorney (“POA”) to be witnessed virtually. This option allows you to sign a physical copy of your Will and (“POA”) in the comfort of your own home while your witnesses watch on a virtual conference call. If you opt to have your Will witnessed virtually, at least one of the witnesses must be a lawyer or paralegal in good standing with the Law Society of Ontario.