Its amazing, in today’s complicated world, that I encounter people that do not have current and valid wills and powers of attorney. The estate consequences can be significant and expensive if one passes away without one. Don’t presume common sense would prevail as an alternative. Your most valuable asset is your children. You need to provide guardian provisions to ensure they are raised as you would raise them.
I was somewhat uplifted recently in a client meeting when I met with a newer client and they had acted on the advice presented at a prior meeting. A few weeks later, another conversation involved a prospective client new client in their early thirties with a brand new baby. In his case, it was simply a case of not being informed. The message is it you don’t have this done, do it. And no, as a Financial Life Planner, I do not recommend that someone just go to a big box store and buy a will kit.
So, I thought as a way of enforcing the point, I would dedicate this article to the consequences of going forward without a will. Let me reinforce the point. If making a will has been one of those things on your long term to-do list but doesn’t seem to ever become a top priority, you’re not alone. Studies show that as many as 74% of Canadians don’t have an up-to-date will, and about half don’t have a will at all.
I get it. Wills require you and your family to think about death which tends to be a subject most of us would rather avoid. If you don’t think of your assets as being particularly valuable or if you assume that your family members are all reasonable and would distribute your estate equitably, it’s hard to justify the time and expense a will might require.
However, and you knew this was coming, dying without a will can be more problematic than most people realize. Many people mistakenly think that the government takes your assets and estate if you die without a will. This is not true.
Here are the things that happen if you die without a will in Ontario. First, there are laws that govern what happens when someone dies without a will. While it is always preferable to have a will to express your own choices as to what should happen to your assets and estate after death, the laws that apply distribution of the property of the deceased without a will attempt to equitably distribute the assets of the deceased among the deceased party’s relatives.
When a person dies without a will someone, usually a close relative, must apply to the court to be appointed as the estate trustee without a will. If there is a dispute as to who should be appointed the matter must be referred to a judge to determine the most appropriate person to act as estate trustee.
The Estate Trustee must identify and locate all of the assets and liabilities of the estate, and must ensure that liabilities of the estate including debts, funeral expenses, estate administration costs and taxes are paid. The balance left over after payment of these liabilities forms the assets available for distribution from the estate. The trustee is a fiduciary and must account for every asset.
In Ontario, the Succession Law Reform Act and and the Family Law Act intersect to create rights for the surviving spouse of the deceased.
The Family Law Act defines a spouse as a married person. Under this Act, a married spouse is entitled to receive half of the amount by which the deceased’s assets exceed the assets of the surviving spouse. This ensures that the surviving spouse has the opportunity to share equally in any increase in the value of the property that the couple earned over their marriage. The surviving married spouse must elect to accept this payment or take what they are entitled to under the Succession Law Reform Act. The married spouse also has the right to remain in possession of the matrimonial home for a period of 60 days following the death of their spouse, on a rent-free basis.
On the other hand, the Succession Law Reform Act gives all spouses whose spouse dies without having made a valid will a preferential share. They have the right to receive the first $200,000 of assets from their deceased spouse’s estate. In addition, they have the right to share in the balance of their deceased spouse’s estate as set out below.
The Succession Law Reform Act sets up a scheme to divide the estate of a person who dies without a will. If the deceased had assets worth less than $200,000 at the time of their death their spouse will be entitled to the entire estate. If the assets of the deceased are worth more than $200,000 then the remainder of the estate after payment of the preferential share will be divided as follows:
- The surviving spouse and one child – each get 50% of the remainder of the estate.
- The surviving spouse with more then one child – the spouse gets 33% and the children share 67% equally of the remainder of the estate.
- If a child predeceases a parent – that child’s share will be divided among the children that survive him.
- If the person who died leaves no spouse or children, then their estate is divided among their parents;
- If they have no surviving parent it is divided among their brothers and sisters equally;
- If they have no brothers or sisters surviving them it is shared among their nieces and nephews; and
- If they have no surviving nieces or nephews then it gets distributed among their next closest next of kin.
Only when a person dies having no will, no spouse, child, issue, parent, sibling, niece, nephew, or next of kin surviving them will their property become the property of the government.
If the deceased was responsible to provide support to someone but did not make adequate arrangements for support (e.g. child support), then the defendant may bring a claim for relief and the court will determine what support, if any, is applicable in the circumstances. The judge may make an order for payment of same from the assets of the estate and the order may supersede the interests of a spouse or others.
Apart from the legal speak, some people may now be a little confused, and overwhelmed, with the legalities. They are left wondering how if may affect their estate, and more importantly, their families if they do not have a will when they die, again know as intestate. If these are not enough points to consider, each individual situation would probably incur more. Let’s look at some of the main issues that are commonly occurred when there is no will in place.
- Common-law spouses do not automatically inherit your estate. There can be some confusion over who controls your estate and how it is to be distributed if it is not made clear in a will.
- Your closest relative will most likely be appointed as your personal representative. Someone will have to step up to the plate to administer your estate. Is your current closest relative the best judge?
- If you have no living next of kin, your entire estate goes to the Ontario government. The Ontario government will first search for a living relative. Your favourite charities have missed a chance to benefit.
- Personal items may not be distributed as you would have liked. For example, your niece getting your mother’s wedding ring. It is now dependent on the goodwill of whoever is administering your estate.
- Possible tax savings may be lost. Smart estate planning can minimize the tax paid by your estate to increase what is available to heirs.
- A dependent child or other relative may not be properly provided for. With no instructions in a will, a dependent child who needs long-term care may not receive the financial support you were hoping to provide.
- If you are the primary caregiver for your children and you die, without the other parent around, you lose the ability to name their guardians. The court will make the decision without your input.
- You have no control over your funeral and burial arrangements. If your court chosen executor doesn’t know or care about your wishes, your funeral and burial arrangements will be made according to their preferences.
- Your preferred charities may not benefit. Without a will, the charities you hoped to support with your estate won’t receive anything.
Making a will doesn’t have to cost a lot of money and it doesn’t even have to take a lot of time. More importantly, the cost of not doing it can be huge. So no matter how you do it, or which lawyer you engage to help you, it’s important that you make it a priority because there is a time when it’s too late to draft a will. The same argument also goes to naming Powers of Attorney. Getting it done right is part of Keeping Life Current.