The Importance of a Will
May 1, 2017
“Should I have a Will?”
This is one of the most common question for a Wills lawyer. Generally speaking, people don’t like contemplating their deaths, nor do they like paying someone else to contemplate their deaths. So my typical answer – “Well, yeah, you probably should” – is probably not what they’re hoping to hear. Often what follows is a grim, knowing nod. “Yeah, that makes sense. I wouldn’t want the government getting everything.”
In Ontario, keeping your assets away from the government isn’t really the issue. Rather, the importance of having a Will is more a matter of ensuring that your assets pass smoothly on your death to those people who you actually want to benefit.
If you die without a Will (known as dying “intestate”) while resident in Ontario, it is unlikely that your assets will go to the government (this generally only happens if you die with no next-of-kin whatsoever). Instead, the legislation in the province provides a formula for determining to which family members your assets will pass. What this means is that the government has effectively written a Will for you. If you die resident in Ontario without a married spouse or children, for example, your assets pass to your parents, or, if they’ve both predeceased you, to your siblings.
If you took the time to think about it, the family members who would benefit on an intestacy may not be the family members you would actually want to benefit in the event of your death. Consider, for example, an estranged parent, a half-sibling you don’t really know, or a husband or wife from whom you separated but never divorced. Depending on your circumstances, any one of these people could receive your assets on your death at the expense of someone you would want to benefit. A common law spouse, for example, has no automatic entitlement on an intestacy in Ontario.
“Well,” someone might say, “that doesn’t really matter. I don’t have any assets anyway.”
Although that may be true in terms of real estate, or investments, people often forget life insurance policies, particularly those they obtained through a group benefits policy at work. If you haven’t designated a beneficiary on an insurance policy, that policy falls into your estate. If you die without a Will, that policy will then get divided up according to the intestacy rules.
The need for a Will may feel less pressing for married couples who have no kids, own assets jointly, and have designated each other as the beneficiary of registered investments and insurance policies. In those circumstances, all assets may very well pass outside of the estate to the surviving spouse, making the intestacy provisions seem irrelevant. But what if both spouses die together in an accident, or the surviving spouse dies before making a Will? It then becomes something of a lottery with respect to who dies second: If one spouse survives for a day following a car accident, that spouse’s family could get all of both spouses’ assets. In most cases, that just isn’t logical.
Having a Will takes on added importance for parents. In the first place, if an Ontario resident dies without a Will, on the first spouse’s death, any assets that the first spouse held solely may have to be a divided between the surviving spouse and children. This isn’t usually the desired result, as spouses often prefer to leave everything to each other. Moreover, any assets that go to children under the intestacy provisions will be held by the Superior Court in Ontario until the child turns 18. After they turn 18, all of the funds get paid over directly to the children. Parents usually prefer a trusted family member or friend to hold the funds until the child is older than 18, something that is only possible with a properly drafted a Will. There is also the matter of appointing a guardian to have the physical custody of the child, which can be done in a Will.
Another important issue that is addressed in a Will is the appointment of an executor to administer the estate. If an Ontario resident dies without a Will, the class of people who can act as executors is limited (only other residents of Ontario), there are additional requirements and paperwork as part of the probate process, and there is a delay the administration of the estate.
Having a proper Will in place is important for a number of fundamental reasons. Beyond these basics, however, it is also important to keep in mind that in many circumstances, a properly drafted Will can also offer various savings to the estate in the form of income taxes and probate fees. I’ll describe some of these planning opportunities in future entries.