Wills and Estate Planning

Wills and Estate Planning

Who should have a will?
Requirements of a valid will
General types of wills
Limitations of a will
Revocation of a will
Review and amendment of wills
Appointment of executors, guardians,
and trustees
The role of estate planning
Distribution of the estate
Trusts
What is a Will?
 A will is a legal document that provides
for the orderly transfer of ownership of
the assets of a person when that
person dies
 It can only be enforced upon death and
can be revoked at anytime before
death
 The wishes of the deceased (testator)
include;
 Transfer of cash and specific property
through bequests (legacies) to
specific individuals (legatees)
 Transfer of the balance (residue) to
the testator’s heirs
Who should have a Will?
 Everyone should have a will to
avoid intestate succession
legislation (law distributing the
estate for someone who dies
without a will) determining the
distribution of assets
 Common law spouses may
receive nothing is the person dies
intestate
Requirements of a valid will
 The legal requirements of a will are governed by
the place of domicile (where the person has
his/her main place of residence)
 Establishing domicile
 Location of the individual’s home
 Where the individual’s family lives
 Location of bank accounts
 Location of regular employment
 Location of social connections
 Frequency of visits to domicile
 Documented evidence indicating the testator’s
intention
 Domicile is important because it determines how
the estate is administered and the tax laws that
apply
 Real property is governed by the laws where the
property is located
Establishing a Will
Legal capacity of the testator to establish
a will:
 Reaches the age of majority, be married,
or be a member of the armed forces

 Be of sound mind

 Be free of any undue influence from

another individual
Information in a Will
 Domicile of the testator
 Statement of revocation of previous wills
 Instructions to pay testator’s funeral costs, debt
outstanding, taxes owing
 Specific bequests to persons/entities named
 Details of distribution of the residue of the
estate
 Identification of the executor
 Guardians named
 Alternates named to act as executor and
guardian
Types of Wills
 Holograph (handwritten by the testator)
 Conventional (formal)
 “Will Kits” (conventional will drafted
without professional assistance)
 Notarial wills (only apply in Quebec and
executed in the presence of a Notary)
 International wills (in compliance with
international convention)
Holograph
 Written without the assistance of a mechanical
device (i.e. typewriter or computer)

 With or without a witness

 Not valid in Nova Scotia

 BC requires that these wills relate to moveable

property (i.e. cash, investments, jewellery)

 Without professional assistance may lead to errors

and omissions
Conventional Wills
 Provincial Will Act and Succession Law Reform
Act or Civil Code of Quebec

 Must be entirely in writing and signed by the

testator in the presence of two witnesses

 A witness must be over the age of majority and

not be a beneficiary or spouse of a beneficiary

 Useful for witness to sign an Affidavit of

Execution
Will Kits
“Do-it-yourself” kits

 Lack the advice of a

professional
Notarial Wills (Quebec)
 Executed in presence of one Notary
and one or two witnesses
 Notary keeps original copy of will,
testator keeps notarial copy
 Notary can give certified copies of
the will to heirs provided that they
produce proof of the testator’s death
 The proceeds to these wills are not
subject to probate fees
International Wills
 Made in compliance with a
convention that provides a uniform
law

 Valid in every jurisdiction in which

the convention is in force

 Most Canadian provinces recognize

this form
Limitations of a Will
 Substantial compliance allows courts to resolve technical
problems as long as the integrity of the document is not in
question

 Declaring competency means the testator is of sound mind,

acting under free will, without undue influence

 Contesting the will can be done by beneficiaries at great

litigation costs

 Minimizing future litigation the professional should ascertain that

the testator understands;
 The assets that comprise the estate
 The persons that will be the beneficiaries
 Potential claims be spouse and/or dependents
 Terms and conditions of the will
 A will cannot set conditions on gifts that are contrary to public
policy, or promote an illegal act, or that are discriminatory
Limitations of Wills cont.
 Family and dependents are provided for in Family
Law provisions of the relevant province to ensure
adequate support
 They may apply for court relief and the court may
modify the will in order to make provisions for the
dependents
 Spouses may claim equalization payments from the
estate
 Some couples may enter into a marriage contract in
which each spouse agrees to forego any equalization
payment
 If the spouse has not been given adequate resources
to live, a claim for support or on the Net Family
Property provisions may be made
Limitations of Wills cont.
 Three tests will determine whether the court will consider
modifying the will in favour of the dependent
 Was the deceased obligated to provide support to the
dependant
 Did the decease’s will fail to provide adequately provide for
the dependent
 Is the dependent in need of support
 The court also considers;
 The means and needs of the dependent
 Any gifts or provisions made while the deceased was alive
 Lifestyle the dependents had previously
 Written reasons the deceased put in will to deprive the
dependent of benefit
 Whether the dependent is disabled
 In Quebec, dependents other than spouses are limited to six
months maintenance
Revocation of a Will
Three common reasons;
1. Automatic revocation
2. Marriage
3. Divorce
Automatic Revocation
 New will
 Conflicting wills
 If new will doesn’t revoke a previous
one, both may be valid
 Where conflict exists, latter will
prevail
 Deliberate destruction
 Can be done by the testator or
under written instructions from the
testator
Revocation of a Will
 Marriage
 Results in a revocation of a will (except Quebec)
 New will should be made upon marriage to avoid
dying intestate

 Divorce
 Does not revoke a will
 Some provinces have laws that revoke certain
provisions in the will (i.e. bequests, legacies and
executorships are formally revoked)
 Legal separation does not affect the will (except BC)
Review and Amendment of
Wills

 A will should be reviewed anytime

there is a material change in an
individual’s life
Material Change Includes:
 Change in the value or components of the
estate
 Liquidity problems
 Acquisition or disposition of substantial
assets
 Changes in Tax Law
 Change in residency
 Change in family size
 Change in life expectancy/health
 Change in marital status
 Change in relationship to the beneficiaries
 Change in Family Law
Codicils and Memoranda
 Codicils
 Legal document that can revoke, modify, or add
provisions to a will without redrafting the will
 They are attached to the will

 Memoranda
 A list of objects that are to go to specific
individuals which is then referenced in the will
 For any changes, just change the memorandum,
not the will
Alterations, interlineations &
Obliterations
 Alterations refer to changes made in the will

 Interlineations refer to insertion of words

between existing lines in the will

 Neither is permitted after a will has been

signed

 Obliterations refer to deletion or erasure of

certain words in the will
Appointment of Executors,
Guardians & Trustees
 Considerations include;
 The family will have to live with the
choice for a long time
 There is a process to replace an
incompetent or untrustworthy executor
or trustee, but the process is a long and
expensive one
 Executor needs experience in finance,
administration, investments and
taxation
 Types of executors
 Corporate
 Individual
 multiple
Corporate Executor
 Appropriate if assets are significant and a
resulting trust is expected to last a
number of years
 Advantages
 Has the necessary experience
 Continuity because the corporation
cannot be out-lived
 Focus because this is the business of
the executor
 Multi-faceted expertise
 Financial security because of the
corporation’s resources
Individual Executor
 If the estate is not large

 Appropriate characteristics;
 Likely to outlive the duration of the
estate
 General expertise in finance,
taxation and investments
 Be reliable and have knowledge of
wishes of testator and beneficiaries
Multiple Executors
 Take advantage of different skills

 The executors collectively bring

a blend of characteristics to task
Death of an Executor
 If alternative is not specified,
then the executor’s executor is
automatically appointed

 If the executor does not wish to

serve, the court will appoint an
administrator
Guardianship
 Choice of guardian is chosen by
testator if there are any minors or
disabled dependents

 Is the guardian someone the

dependents want to live with

 Is there adequate funding to

support the dependents
Trustees
 For trusts set up by provisions of
will

 Can be same person as executor

 If no trustee named, the court will

appoint a public trustee until the
children reach the age of majority
The Role of Estate Planning
 Objective is to create a process whereby the
individual identifies and implements steps to
effectively manage the succession of the estate

 The steps include identifying;

 The individual’s goals
 Their assets and liabilities
 The circumstances of the intended beneficiaries

 The goals
 Orderly succession includes;
 Certainty of achieving the individual’s goals
 Be free of the influence of third parties
 Avoid any interference of the court system
Role of Estate Planning
 Personal needs
 Preserving wealth and generating cash flow
 Family needs
 Enable the family to be provided for
 Business succession
 Determining to whom and how the business will pass
 Income tax planning
 Reducing taxable income
 Maximizing use of tax credit
 Income splitting
 Use of exemptions
 Minimizing probate fees
The Individuals Assets and
Liabilities

 Establish the personal choices that are

available

 Determine circumstances that affect

beneficiaries
Distribution of the Estate
 Objective of estate administration is the
distribution of assets to the beneficiaries
under the following rules of law;
 With a will, distribution is determined by its
terms
 With no will, distribution is dictated by
provincial law
 The personal representative must
understand what is required to;
 Meet the terms of the will or intestate
succession laws
 Handle cases where there is a deficiency of
assets
 Manage the estate where the beneficiaries
have predeceased the testator
Order of Distribution
 Once letters of probate are issued, the representative
has a clear mandate to distribute the estate
 Order of distribution after payment of debt and taxes;
 Specific bequests
 Legacies to named beneficiaries
 Residue divided among remainder of beneficiaries
 It is advisable to circulate proposed scheme of
distribution of the estate and to get beneficiaries to
give signed releases
 If the actual assets are distributed as is (i.e. real
estate, securities, etc), this is called “in specie”
distribution
Order of Distribution
 Matrimonial and dependent claims are
payable out of the estate before any
distribution of the estate
 When there is no will (intestacy);
 The spouse and blood relatives share the estate
 With no children, the spouse is entitled to the entire
estate
 In some provinces, the spouse is entitled to a
preferential share of the estate, in addition to any
percentage share of the residue of the estate
 The distributive share is the proportion of the estate
after the preferential share is satisfied
 In Ontario, when there is a spouse and children, the
first $200,000 goes to the spouse, 1/3 of the rest to
the spouse, 2/3 of the rest to the children
Trusts
Trusts
 A trust is a legal obligation, not a legal entity
 Tends to relate to property
 The trustee holds the property in trust for the
beneficiary
 Only the trustee can enter into contracts that
affect the trust property
Trusts
Trusts are created for;
 The protection of under-age
beneficiaries
 To protect against spendthrifts
 To protect in the event of incapacity
 To protect against creditors
 To protect against matrimonial claims
 To protect against claims under
dependent’s relief legislation
 To control the distribution of assets
 To facilitate tax planning
Next Week
Quiz : Wills & Estate Planning
Group Presentation
The Role of the Advisor