It has been estimated that 7 out of 10 Canadians do not have a valid will. Most people have at least a vague understanding of the importance of a will. But some find the idea of preparing for their own death troubling, and nearly everyone finds it an easy thing to put off. Based on our experiences dealing with both will-planned and intestate (no will) estates, here are seven potential reasons why you should have a will:
- You want your affairs handled by someone you trust. The executor named your will has immediate powers to deal with your estate when you die. If you die intestate, no one has the power to deal with your property until a court appoints an administrator. Disputes may arise over who will apply to be the administrator. Also, the court may require the administrator to post a bond, adding further complication and expense.
- You want to provide well for your family. The distribution of an intestate estate follows a scheme set by law. For example, if you die in B.C. leaving a spouse and two or more children, your spouse is entitled to the first $65,000 of the estate, a life interest in the matrimonial home, and one-third of the balance of the estate. The children get the rest. Depending on the circumstances, this may not leave your spouse enough to survive on.*
- You don’t want your in-laws to get everything. B.C.’s intestate distribution rules can lead to unexpected results where more than one family member dies at the same time. For example, Abe and Bea are married with no children. If they die together in a car accident, Abe, who is older, will be considered to have died first leaving everything to Bea. The entire estate will be distributed to Bea’s family, and Abe’s family will receive nothing.*
- You want to choose your child’s guardian. If you are not able to take care of your minor children, who will? If you don’t designate a guardian in your will, one will be appointed by the court. Delays are to be expected and disputes over guardianship are more likely to arise.
- You don’t want to pay more tax than is necessary. A will provides opportunities to reduce taxes. For example, one easy way to defer income taxes on death is to leave property that has appreciated in value to your spouse. With no will, a large portion of your estate may be left to children or others, resulting in a higher tax liability to the estate.
- You want to benefit your favourite charities. Leaving gifts to your charities can reduce your estate’s tax bill, leaving more available to distribute overall. If you intend to make sizeable charitable gifts, get advice specific to your situation.
- You want to provide in creative ways using trusts. Trusts create continuing interests that serve many purposes. For example, you might include a trust in your will to provide for minors, to delay distribution to children to a specified age, to control spendthrift beneficiaries, to keep assets within family bloodlines and away from spouses, or to create consecutive interests. Properly structured trusts can also reduce taxes in some situations.
*Note that the intestacy and survivorship rules will change when the new Wills, Estates and Succession Act comes into force.
Tags: estate planning, intestacy, wills