By Olev Edur
If you haven’t yet found the time to draft a will, you should, and if you do have one, it might be time to review it
The tax-filing season that’s just around the corner is the perfect occasion to consider your estate and ensure that you have a will spelling out your testamentary intentions. After all, your mind will already be focused on your assets and liabilities and your financial documentation will be near at hand.
While a recent study found that 26 per cent of Canadians over the age of 55 don’t have a will, Leanne Kaufman, president and CEO of RBC Royal Trust, says: “Everyone should, for a couple of reasons. First, when it comes to assets and liabilities, chances are that any third party—such as a financial institution or a realtor—will want to know that someone has the authority to deal with them. If no executor is appointed through the will, then someone must apply to the court to get that authority—an added complication at a time when the family is grieving.”
The second reason is that a will enables you to ensure your assets are distributed as you want, Kaufman says, adding that if there’s no will, the distribution of your assets will be done according to your provincial government’s rules regarding intestacy. Needless to say, this may give a result quite unlike what you might have wished.
Landon Hang, a national director at BMO Trust Company, agrees that having a will is essential, not only for the above reasons but also because creating a will compels you to think about exactly what you want to happen and thus develop a comprehensive plan for your estate.
“We encourage everyone to have a will,” Hang says. “The process of drafting a will helps the testator to develop a proper estate plan, and it also provides a guide for the executor, so they understand their duties and obligations and know exactly what they have to do.”
Furthermore, while some pundits might suggest that a will isn’t really necessary if your affairs are very modest and your estate plan is straightforward—if, for example, what little you have is simply going to a spouse or to an only child—both Hang and Kaufman disagree.
“It’s not just the rich who should have a will,” Hang says. “Every case has its own complexities when it comes to estate planning, and those with few assets have less of a runway, so to speak, when it comes to getting it right. You want to make sure of who is going to be managing your assets, who gets what, and when. Will it be right away or, in the case of minors, when they reach age 18 or 25? Should an inheritance be given as a lump sum or in instalments? What about advance gifting? You need to think about all of these things.”
A Valid Will
The consequences of not developing a proper estate plan, with a will that puts it into effect, can be troublesome whether you have a large estate or not, and you’ll have no second chance to put things right if there’s a problem. While you don’t necessarily need to seek legal help—most provinces, for example, now accept “holograph” wills (entirely handwritten and signed by you)—it’s highly advisable because even a small mistake can negate the entire will and there are many things that can go wrong.
“There are definite advantages to getting legal advice,” Hang says. For starters, wills and estates fall under provincial jurisdiction, and each province has different rules. “You need to understand the rules in your province. For example, your province may accept holographic wills, but how do they have to be signed? And there can be a lot of ambiguity in certain words, such as ‘between’ or even ‘and’ and ‘or.’ The use of the term ‘perpetuity’ can also be problematic. Lawyers know the legal significance of different words; they bring a lot of knowledge about how to draft a will properly from a legal perspective, and they’re familiar with the types of problems that can arise.”
The usual reason for wanting to avoid a lawyer is money—people are reluctant to seek advice for fear of what the process will cost. But the fees can be relatively modest, especially when it comes to straightforward situations. And there are some things you can do beforehand to help minimize these costs.
“People are always concerned about cost, but the lawyer fees pay for expertise in dealing with complexities, and for time spent on the case,” Hang says. “You should have a conversation with a lawyer—the first meeting should be free—so that the lawyer understands what’s involved and can give an estimate of the total costs before you pay anything.”
In fact, you might want to visit with two or three lawyers initially, so you can choose the one who seems most understanding of your needs and with whom you feel most comfortable. Again, there’s no cost to this added effort, and it can make the way going forward smoother.
Hang advises that to keep fees to a minimum, you should do some homework in advance. “Before meeting with the lawyer, try to plan ahead as much as possible,” he says. “What are your goals? What assets do you have and how are they owned? Sometimes, for example, assets such as real estate or bank accounts are owned jointly with a spouse or child. In the case of real estate, how much is it worth, now as well as when you bought it? Who and where are the beneficiaries? How are they supposed to receive their bequests? The more you can do in advance, the faster and less costly the process will be.”
With divorce and remarriage becoming increasingly common, children from the families of both partners may need to be considered, and that introduces further complications when it comes to estate planning; it also makes the wording of your will more critical.
“When it comes to blended families, that’s when you definitely should reach out for some professional advice,” Kaufman says. “It depends on your particular situation, and everyone is different. Every province is different, too, and if you get anything wrong, it could invalidate your will.”
“Separation and divorce are big reasons for reconsidering a will,” Kaufman adds. “If you have a new partner, you may, for example, want to consider the use of a trust so that the kids from your first marriage are protected. Or, if you treat any children from a new marriage as your own and want them to share in your estate, the language has to be very specific. Any wording that is confusing or ambiguous could create ill feelings or even result in litigation.”
Another area that may need special consideration these days is that of virtual assets—digital property is becoming increasingly commonplace, but these assets may need to be treated differently from other assets. Studies have found that while the vast majority of seniors now have an active online presence in areas such as banking or social networking, with online assets including collections such as photographs or music, most make no mention of these assets in their estate planning.
“Digital assets are different in that they are not necessarily covered by a will,” Kaufman says. “Every time you open an account and enter your username and password—even if you just scroll through the website—the terms and conditions of that site will set out the rules about who can step into your shoes, and you have to follow the particular process dictated by that platform. And every site may be different. You need to do what’s required in the terms and conditions—that’s the only way your executor can access that site. If the executor uses your credentials, they could get into trouble. That’s how fraud happens, so it’s not permitted. If there’s something of material value, such as a positive account balance or cryptocurrency—or photos on social media platforms—then access will be restricted.”
“First among the biggest mistakes I see in estate planning is not having a will,” Hang says. “Second is not having a proper plan—for example, who manages the assets, with what level of discretion and under what conditions? It’s not enough simply to say in your will that everything goes to X. And the third mistake I often see is a lack of communication.
“You have to discuss your intentions in detail with whomever you choose as executor. And you have to explain them to beneficiaries because they may have expectations—for example, that they’re going to get the entire estate. Lack of communication has the potential for creating a lot of problems.”
Finally, everything changes over time, so you should take a fresh look at your will at least every couple of years to make sure that all names, addresses, assets, and amounts still apply. “Regular reviews of your will are important—you need to make sure that everything in the will still fits with your circumstances,” Kaufman says. “Otherwise, the result can again be confusion and delays.”
You can, however, reduce the cost of such reviews, too, by including details such as the descriptions, locations, and values of all your belongings in a separate document that can be appended to, and referenced in, the will proper. That way, you don’t need to change the will itself if you’re simply updating values or buying or selling certain assets, although fundamental changes in your planning—such as changes in beneficiaries or the allocations to those beneficiaries—will still need to be made in the will itself.
Choosing Your Executor
Regardless of how carefully you formulate your estate plan and detail your intentions in a will, all could come to naught without a competent executor to carry out your wishes.
“Choosing the right executor is very important,” says Landon Hang, a national director at BMO Trust Company, adding that it can be anyone—a family member, a trusted friend, or a professional trustee.
Nevertheless, you need to bear in mind that certain skills will probably be required, given the scope of what must be done. The duties of the executor can be wide-ranging, sometimes complex, and often time-consuming, and can include:
– finding the will and determining what’s required;
– working with a lawyer to arrange probate (the process of legally validating a will);
– helping with funeral arrangements;
– locating and dealing with beneficiaries and possibly other interested parties;
– locating and listing all the deceased’s personal as well as financial assets and liabilities and arranging for their distribution to beneficiaries (this may necessitate the timely sale of assets such as stocks or real estate, so some degree of discretion may be appropriate, depending on the acumen of the appointee);
– hiring professionals to handle duties requiring particular skills, if necessary;
– discharging debts and paying estate expenses (possibly including placing advertisements for creditors);
– dealing with financial and other institutions (such as banks, insurers, pension plans, or family businesses);
– filing a final tax return.
There can be even more. You want someone with at least some degree of financial acumen as well as interpersonal skills and also someone who has the time necessary to execute all these duties. You can appoint more than one executor (as co-executors), and sometimes testators will designate both a personal and a professional executor. And you should always choose a backup, just in case your original choice or choices are for some reason not able to perform the function.