November is “Make a Will Month” in Ontario. In the spirit of raising awareness for how essential it is to have a Will, I thought it would be helpful to debunk some common myths I often hear as an estate planning lawyer. By shedding a spotlight on these themes, I hope that you will be invigorated to take action to complete your estate plan.
1. “If I don’t make a Will, the government will get everything.”
This is not necessarily true. In Ontario, if an individual dies without a valid Will (called dying “intestate”), his or her estate will be distributed according to a government distribution scheme called the law of intestacy that is set out in Ontario’s Succession Law Reform Act (the “SLRA”). It is only in the scenario that someone dies without a legally married spouse, lineal descendants or relatives that the estate would “go to the government” i.e. becomes property of the Crown.
Simply put, if you die without a Will, it is not likely that the government will get your estate, but the law will determine how your estate is distributed. An important reason to make a Will is so that you have a say in who your estate goes to.
2. “I don’t need a Will because I am married so everything will go to my spouse”.
The SLRA only provides for legally married spouses, not common-law spouses. This means that if you have a common-law spouse and die without a valid Will, he/she will inherit nothing under the SLRA. If you would like to benefit your common law spouse, you would need to do so in a Will.
If you die without a valid Will and are legally married and have a child or children, your surviving (legally married) spouse would be entitled to what is called a “preferential share” of your estate, which is currently prescribed at $350,000, and anything over this amount is split among the surviving spouse and the children. What often comes as a surprise to parents is that, if a minor child inherits in this scenario, and if the amount is over $35,000, the surviving parent does not get to hold the child’s inheritance on his or her behalf – it is “paid into court” and paid out to the child when he/she turns 18 years old.
3. “My family is on good terms, they will sort everything out”.
If you die without a valid Will, no one, not even your closest family, will have the legal authority to administer your estate until someone makes an application to court to be appointed as your estate trustee (also known as an “executor”). One of the important things a Will does is appoint an estate trustee, who is responsible for administering the estate, which can save time and reduce complexity after you die.
It is not a given that your family dynamic will remain the same after you are gone. Not having an estate plan, or not having a good one, can lead to confusion and friction between even the closest of families. Making a plan is one of the best things you can do for your loved ones so as not to leave a mess at an already difficult time.
4. “My Will applies to all of my assets”.
Your Will may not necessarily apply to all of your assets. How assets are owned and held on death determines how they pass. While there are always exceptions, generally assets held jointly as “joint tenants” as between spouses pass automatically to the surviving spouse when one spouse dies, by right of survivorship, outside of the estate. Similarly, proceeds of plans or policies, such as RRSP/RRIFs, TFSA, life insurance and segregated funds can pass outside the estate by beneficiary designation, if a beneficiary is named on the plan/policy and if that beneficiary survives. A good estate plan focuses not only on the Will but on the entire plan.
One point that individuals are often surprised to learn is that separation or divorce does not automatically override any existing beneficiary designations naming an ex-spouse. This means that if, at one point in time, you named your now former spouse as the beneficiary of your plans and policies, did not update the beneficiary designations, and you pass away, the ex-spouse could inherit the proceeds of the plans and policies because they are still the named beneficiary. A good estate planning lawyer will draw attention to these types of matters to avoid unexpected or undesirable outcomes.
5. “I don’t need a will because I already have a Living Will, and/or “In my Will I can appoint someone to make decisions for me if I lose capacity”.
There is often confusion around this point. A Last Will and Testament, Power of Attorney for Property, and Power of Attorney for Personal Care are three separate legal documents. A Will takes effect on death, while Power of Attorney documents do the opposite: they apply during life and are no longer effective on death.
A Will appoints an estate trustee, responsible for administering an estate on death. Power of Attorney documents appoint an attorney, responsible for decision-making during life. An attorney for property deals with decisions regarding financial affairs, while an attorney for personal care deals with decisions regarding health and well-being. The word “attorney” also sometimes causes confusion – the attorney is the person appointed as the decision-maker, not the person’s lawyer (and they do not have to be a lawyer).
Ontario law does not use the term “living will”, although sometimes people use this term to refer to written wishes regarding medical treatment and/or personal care. This is also known as an advance directive.
6. “Having a Will prepared by an estate planning lawyer is expensive”.
The expense is relative, as there are several great estate planning strategies and opportunities that could lead to tremendous savings in estate administration tax (i.e. probate tax), income tax and legal costs down the road, which could far outweigh the cost of working with an estate planning lawyer to design a tailored estate plan. A well-crafted estate plan could also reduce the prospect of a disputed estate, which could be eaten by legal cost, expense and delay that could have been avoided with a solid plan.
Completing or updating your estate plan should not be a stressful or difficult experience. We encourage you to work on your estate-planning project today with one of the specialists in our Estate Succession Group.
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.
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