Foreign executors

bridge-1I have many clients with children who live abroad. This makes things complicated when they want to have their child who lives in England or the United States act as the executor of their estate, because the courts in Ontario have broad powers to require what is called a bond. Basically, the courts can say that the executor has to pay into court an amount equal to the value of the estate; executors can get around this by buying a bond, or a type of insurance policy, to cover the amount. The cost of the bond is not reimbursed when the money is released from the estate to the beneficiaries, so it is a loss to the estate.

Generally, the court will not require a bond if the executor is in Ontario, other parts of Canada, or even a commonwealth country such as England or Australia. Generally, the court will require a bond if the executor is anywhere else.

If you are thinking of naming a foreign executor, in addition to the difficulty of acting from afar, keep bonding in mind.

Common law is not married

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I return to this topic frequently because it bears repeating: if you are common law, in Ontario, you have no inheritance rights. If your house is owned by your partner, you could get kicked out after they die. You will get none of their assets. You will have to sue their estate for anything.

It’s harsh, but it’s the law. If you are common law, get a will.

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Disability savings accounts

piggy-bankIf you are on Ontario’s disability savings program, there are options for saving funds. There is a plan called the Registered Disability Savings Plan that allows you to invest up to $100,000.00 for your personal use, which will not affect your ability to stay in the ODSP program. You have to set up a formal plan through a bank or financial planner, but if you have come into significant funds and want to stay in the program, it’s worth talking about.

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Your photocopy of your will is not your actual will

photocopierSo don’t write changes onto it, thinking that they’ll be effective.  For that matter, a typed will that required witnesses needs any changes to be initialled by you and by two witnesses.

If you want to make changes to your will, your best plan is to see a lawyer to make sure it’s done properly.

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Remarried? Then you don’t have a will any more

just-marriedSo many people are surprised to hear that marriage automatically revokes a will. For a first marriage, this is not such a big deal; when I got married, I would have wanted my husband to inherit from me if I hadn’t updated my will at that time anyway.

The problem arises when this is your second or later marriage, especially if you have children from a prior marriage. Because the rules on intestacy in Ontario are that your spouse gets the first $200,000 of your estate and then shares the rest with your children, you could throw your entire estate into chaos by signing a marriage licence.

Picture this: you are in your seventies, and recently widowed. You are comfortable financially, and meet someone who is equally comfortable financially. You both want your children from your prior marriages to inherit your respective estates, and both have wills that state that. But then you decide to get married. Now, your new spouse is your primary beneficiary, purely by accident, and no matter what your children do, they will not get the majority of your estate.

The only solution to this, unless the law in Ontario is changed, is to get a will done before you marry in contemplation of marriage, or immediately after you marry. It’s critical. Don’t procrastinate on this.

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Who should be your executor?

choiceThe choice of your executor is probably the most important decision you will make when you do your will. Your executor will be responsible for burying you, for selling all of your stuff and collecting the cash, for communicating with beneficiaries, and for distributing your estate. They will navigate tax issues with CRA, be a peacemaker among beneficiaries who may have conflicting requests, and will generally be the person who most determines how much is left in your estate at the end of the day. This is not a decision to be made lightly.

Often, people default to an executor. They will choose a child, or maybe all of their children; I once had a client name all six children jointly. However, this can backfire in a major way if you are choosing because you’re “supposed to” choose your child, instead of choosing mindfully.

If your child is a responsible adult who can manage all of the emotional, mental and physical labour of administering an estate, then by all means choose that child. If not, don’t be afraid of naming a friend, an advisor (if permitted – many professionals are not allowed to be executors for their clients), or a bank.

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Has your life changed? Don’t forget to update your life insurance.

ChangeAnd your RSP, and your TFSA, and your RIF.

Ontario has some laws that many people would find surprising. For example, marriage automatically revokes a will, but divorce, separation and death do not; none of those will change a beneficiary designation on life insurance, etc. It would cause a great deal of turmoil if you died and left your RSP to your former spouse, rather than your current spouse or your children. If your life changes, it’s important to update your will. It is equally important to update all of your beneficiary designations.

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Don’t procrastinate

DelayWe all do it – we put off things that don’t seem urgent, and maybe someday get around to them. Certain things just seem less pressing, and so we delay them even if we know that they are important. This blog post was supposed to go live this morning, and here I am at 3:45pm getting it onto our website. It’s not that it wasn’t important; it simply wasn’t urgent, and so it got delayed to the end of the day.

In my experience, this is absolutely the case with wills. Most people see them as important but not urgent, and so it gets put off, and put off, and put off, until it’s too late. It only becomes urgent when there’s a vacation planned, or someone close to you dies without a will. And then it becomes very urgent, and can result in a will being done too quickly with something missed, or at greater expense.

Having a will is important. You might not see it as urgent, but you would do well to at least bring it closer to the top of your to-do list.

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Stepchildren are not children when it comes to your estate

StepI have more than one client in a blended family. Sometimes, the family is so well blended that the stepparent considers the stepchild to be his or her actual child, but in law, they are treated differently.

If you die without a will, your stepchildren have no right of inheritance. As a result, you could end up with your estate going to one child at the expense of another, even if you intended it to be shared equally.

If you consider someone your child who is not biologically your child, and you have not formally adopted them, you NEED a will.

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Wills for single people

Single chairPrince died without a will, leaving his entire estate to be shared by his siblings. For people who are unmarried and have no children, this is a very important lesson: if you want to control where your assets go, you need a will. The default rule is usually not the ideal solution.

I have a client who is estranged from her mother; her father is deceased. Right now, if she were to die without a will, everything would go to her mother, which is not what she would want. Because she has a will, she is able to leave her estate to several family members as well as a charity.

The main lesson? Even if you’re single, you still need a will.

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