BY: ANDREW STEWART
As one of the few family advisors among my friends, I have quite often been asked my opinion about different types of life and health insurance, how best to use RRSP’s and TFSA’s and my personal favorite; how to prepare for children’s financial future. But when I ask them if they have a Will in place, the familiar responses would be “Oh yeah, I’ve been planning on doing that” or “So, when should I write my Will?” or “why do I need a Will?” Understandably, most people feel uncomfortable thinking about and planning for when they are no longer here. However, most of us have unfortunately experienced the passing of a friend or loved one. We have been old enough to understand not only the emotional but also the financial consequences that a death can have on the survivors if the proper planning was not done.
My recent discussion with a woman who separated from her husband, but never legally divorced has prompted me to write this article. He passed away without a will and has property in the Caribbean. She now has to deal with the challenges of dealing with family members overseas and not knowing what she in entitled to in his estate. Her situation really hit home how much a Will can save your loved ones a lot of headaches and heartaches. It inspired me to try and make sure people know more about what happens if you die without a Will and the importance of having one.
Whether you like it or not, you have an estate plan. If you die without a Will, your assets will be divided according to what are called the “intestacy rules” under the Succession Law Reform Act of Ontario. The intestacy rules set out a hierarchy for the distribution of your assets depending on your family situation at your death. In other words, your estate will be planned for you by default. The results may not be what you intended.
If for instance, you were married but did not have any children, your estate passes to your spouse. The key word in the sentence above is “married”. The intestacy rules do NOT apply to common law spouses. Therefore, if you are in a common-law relationship and want to leave any part of your estate to your common-law partner, you MUST set this out in a written Will. If you don’t, your common-law spouse will need to bring a claim in court in order to receive any estate assets. If for instance, you die leaving a spouse and two minor children, your spouse will receive the first $200,000 and one-third of the remainder of your estate. The balance will be divided equally among your children. So, if your estate is worth $500,000, your spouse will receive $300,000 and each child will receive $100,000. The share for any child who is under the age of eighteen will be paid into court to be invested and managed by the Office of Children’s Lawyer and the Accountant of the Court.
You may be aware that children under the age of eighteen cannot inherit property under Ontario law. However, most people are surprised to learn that a parent or guardian of a minor child cannot accept more than $10,000 on behalf of that child unless they have been given the authority to do so under a judgment, court order, or under a Will. What this means is that if you have $50,000 in a bank account and you leave behind a five-year-old child, any monetary amounts over $10,000 will be controlled by the Office of the Children’s Lawyer until the child turns eighteen, unless the parent or guardian brings a successful application before the courts to become the guardian of property for the minor child. The Office of the Children’s Lawyer will release portions of the inheritance if they are convinced, based on the evidence provided, that the property will be used for the direct benefit of the child. In that event, if, for example, orthodontic braces or school fees are required, an application must be made to the OCL for the funds.
When a child reaches eighteen, that child will be entitled to withdraw all of his or her share of your estate held by the court. Would you really want your child to inherit a large sum of money on their eighteenth birthday? If not, then you need to specify your wishes in a written Will.