Get divorced already

I’ve seen it too many times – someone separates from their spouse, but never gets divorced and never does a separation agreement because they don’t have kids and “it doesn’t matter”. Except, it does matter.

If you are legally married with no separation agreement, your spouse will inherit your entire estate if you don’t have a will. If you want this to happen, then go ahead; do nothing. But this is probably not what you want.

Of all of the clients I’ve had come to my office, bewildered at their sudden inheritance, I’m quite certain that none of them expected to inherit, and I’m also quite certain that their former spouses did not want them to inherit. Further, I’m quite certain that their former spouse did not want them arranging their funeral and burial, but that’s also what legally happens.

Don’t assume you know the law. Don’t assume that what you want to happen, will. If you are no longer with your spouse, get divorced, or get a will. Better yet, get both.

Who is entitled to inherit under your will?

Ontario is a jurisdiction where there is broad testamentary freedom. What that means is that, beyond some basic rules, you can leave your estate wherever you want. If you are legally married (not common law), you have to consider your spouse’s rights. If you have minor or dependent children, you have to consider their rights. And if you financially support someone, even if they are not related to you, they may also have a claim on your estate. Beyond that, you can leave whatever to whoever.

Leaving your estate to one niece and not the other? Totally fine. Cutting out adult, independent children and leaving everything to charity? A-OK. You are always best to consult a lawyer before making a decision that could be controversial, especially if the beneficiaries will need to get along with people who were cut out, but you have no legal obligation to leave an inheritance to someone who doesn’t have a clear right to it.

No Will? No Way!

According to this poll taken in 2018, 51% of Canadians do not have a Will. Of those surveyed, only 35% of those with a Will have one that is up-to-date. That is 65% of Canadians that either have a dated estate plan or don’t have one at all. Why are the majority of Canadians putting off estate planning?

If you die without a Will in Ontario, the division of any assets on your death will be determined by the Succession Law Reform Act. This Act strictly sets out who will inherit under your Estate and might exclude those who you would have otherwise left assets to (such as a common law spouse).

If your estate plan is out-of-date, you could be excluding those you now wish to include or including those you now wish to exclude from inheriting your assets. There are also potential for problems in an outdated Will because of the impact of legal decisions that have occurred since the Will was written.

There are several reasons that people will give for not having a Will or not getting their current Will updated. These include being too young to need a Will, not wanting to think about death, getting a Will costs too much money, and not having enough assets to need a Will. Without estate planning, you could potentially be leaving an estate that could be significant work and very costly to your family and friends. That is why it is so important to have an updated Will, because it is not only yourself, but those you are leaving behind that you have to consider.

 

Who should you name as your executor?

I recently wrote about choosing a local executor. Today, I’d like to talk more generally about who to choose as an executor.

Many people default to a spouse, with an adult child or sibling as an alternate. If you don’t have a spouse, adult child, or sibling, and your parents are no longer living or unsuitable for any reason, or you simply want an alternate to one of those options, who do you have left?

There is no legal requirement that your executor be related to you, so if you have a friend who you trust, that is always an option. Beyond that, you can ask a professional advisor, though some are prohibited from acting and some simply do not feel comfortable doing so.

Another option is a trust company. Most banks have trust arms that will act as executor for a fee. The benefit to using a trust company is that they won’t die, and so will be around in the event of a long-term trust within your will.

When choosing your executor, you should think about what work will need to be done. Do you have young children, and a potentially long-term trust? Do you have complex assets, or assets outside of Ontario? Do you have a complicated distribution within your will? If you are choosing a friend, have you discussed it with them to ensure they are comfortable acting?

Choosing an executor is not an easy decision, but choosing carefully is one of the most important things to do for your estate.

The farther away your executor is, the harder it is for your estate

We live in a very mobile society. Many of us have parents, siblings, or children who live in different provinces or different countries. For many aspects of our daily lives, it doesn’t make much difference, other than the difficulty in having regular visits. For estates, however, it makes a huge difference.

In Ontario, the courts have the right, at any time, to require an executor to pay a bond – basically, an insurance policy – to cover up to twice the value of the estate, in order to ensure that the beneficiaries are protected in the event that the executor disappears with the estate money. In practice, courts rarely ask for an estate to be bonded when the executor lives in Ontario. The further away the executor lives, however, the more difficult it gets.

If your executor lives in another province in Canada, usually they’ll be okay. If they live in a Commonwealth country, maybe they’ll be okay. If they live anywhere else – and that includes the United States – they will almost certainly be required to get a bond. This will result in increased costs to your estate, and will also make the entire administration take significantly longer.

If you have no one else, then by all means, pick an executor who lives further away. But if you have options, it is always better to pick Ontario resident executors.

Want to help the government pay its bills?

Then don’t do a will. In fact, don’t get any professional advice at all.

I regularly see issues in the way clients have things set up – whether that is how they are on title to real estate, beneficiary designations on investments, etc. Even if it’s just a matter of a will making it easier to avoid having to go through the probate process, if you have a will, you are likely to pay less in estate taxes.

Get a will, In the long run, you’ll save money.

Celebrate Good Times

For many people, a major change in your life is a time for celebration. Maybe you recently got married or had a child or won the lottery. First of all, congratulations! Secondly, while this is a time for celebration, it is also an important time to check your will. You might not think to do so, but many major events in your life can impact your will.

A change in your marital status can significantly impact your will. If you get married, any existing will that you have has now been revoked (unless that will specifically states that the will is made in contemplation of your marriage to that individual). This means that your existing will is treated as though it no longer exists. Similarly, if you get divorced, any existing will that you have has now been revoked. Separation from a spouse does not revoke a will, meaning that your spouse can inherit under your will and could still be appointed as your executor.

It is also important to keep track of your assets in case those substantially change. If this is the case, your will might have to be updated to reflect these changes.

So if you just went through an exciting major change in your life, celebrate it, but also get your will updated if its necessary.

Where is your will?

Florence Griffith Joyner was a famous and highly decorated Olympic athlete. She made a will. She told everyone that she made a will. She figured that she had done what she needed to do.

The problem was, she didn’t tell anyone where that will was.

When she died, no one could find the will. It’s entirely possible that it’s still sitting in a lawyer’s office, or that she locked it away in a safety deposit box at a bank she used for nothing else. And in the end, after a years-long fight between her husband and her mother, a third party was appointed as the executor.

It doesn’t matter whether you’ve made a will if your executor and beneficiaries can’t find it.

Fraud by Power of Attorney

A few weeks ago, two people were charged with defrauding an elderly woman in Clearview Township. They managed to commit the fraud through an abuse of a power of attorney.

There is a specific Criminal Code offence of theft by power of attorney. Section 331 of the Code states:

“3 Every one commits theft who, being entrusted, whether solely or jointly with another person, with a power of attorney for the sale, mortgage, pledge or other disposition of real or personal property, fraudulently sells, mortgages, pledges or otherwise disposes of the property or any part of it, or fraudulently converts the proceeds of a sale, mortgage, pledge or other disposition of the property, or any part of the proceeds, to a purpose other than that for which he was entrusted by the power of attorney.”

If you sign a power of attorney, it is very important to choose the right person to act for you. While none of us can control what that person ultimately does, the most important first step is picking someone who will always keep your best interest in mind – and not treat your money as their bank account, or decide to take what they consider their inheritance a little early.

Common law is not married

Period. End of story. In Ontario, common law spouses may be able to sue an estate for support, but they have no automatic right whatsoever to inherit if there is no will. It is harsh, but it is the law. If you are not legally married and most assets are not in your name, your partner needs a will or you will be left out in the cold.