Estate planning is the process whereby an individual identifies and implements steps to achieve the following:
The individual’s personal and family objectives for the control and enjoyment of his or her property during his or her lifetime
The orderly succession to the individual’s property following his or her death.
Estate planning steps may be implemented to take effect either during the individual’s lifetime or following his or her death. A primary concern will be to achieve the individual’s objectives with as much certainty as possible.
What is a Will?
Generally, the first step in estate planning is to create a will. A will sets out who you would like to administer your estate, to receive your assets and to be the guardians of your minor children in the event you pass away. This allows the writer of the will to make these decisions themselves rather than default to the legislative provisions that apply when a person dies without a will.
A will is a primary tool a lawyer uses to implement a client’s proposed estate plan
It is the document which sets out the persons who will assume control of the client’s estate upon death and the manner and scheme of gifts and distributions the client wishes to make to intended beneficiaries
Properly drafted, a will achieves these estate goals in a manner which will maximize the advantages to the intended beneficiaries while minimizing the potential expenses to the estate
Essentially, a will allows you to:
Appoint a guardian for children who are minors;
Appoint an executor to manage your affairs after death;
Choose family, friends, charities, etc. that will receive your assets;
Ensure your children receive their inheritance at the age and in the way that you feel comfortable with; and
Possibly reduce taxes that would have to be paid as a result of your death.
Validity of Wills
Formal requirements for a valid will under the Wills, Estates and Succession Act (“WESA“) are as follows:
The will must be in writing.
Will must be signed by the will-maker (or another person in will-maker’s presence who signs either the will-maker’s name or their own name, under direction from the will-maker).
The will-maker’s signature must be made or acknowledged by him or her in the presence of two or more witnesses both present at the same time.
Two or more witnesses must subscribe the will in the presence of the will-maker
Exception: if will-maker is on active service w/ armed forces- do not require attestation
Signing witness must be at least 19 years of age.
If witness is incompetent > no effect on validity of will.
If witness = a beneficiary, or the spouse of a beneficiary > the will is not invalid, BUT any gift that beneficiary under the will is rendered void.
If witness = executor, or the executor’s spouse > the will is not invalid, but any “charging clause” in favour of that executor will be void (executor is still entitled to recover statutory compensation).
Will-maker must be at least 16 years old unless he or she is in the armed forces.
In addition to satisfying the formal requirements, the testator must possess the necessary intention to make a will. The requisite mental elements are:
The testator must understand the nature of the act in which he or she is engaged (making a will); and
The testator must be free of a mental disorder (i.e.he or she ought to be capable of making the will with an understanding of the nature of the business in which he or she is engaged, a recollection of the property he or she means to dispose of, the persons who are the object of his or her bounty and the manner in which it is to be distributed between them).
The testator must exercise genuine free choice in the making of the will (i.e. no suspicious circumstances or undue influence)
Revising your Will
You should always revise your will if there is a significant change in your life that could include:
You want to change the designated Guardian for your children
You want to change the designated Executor and/or Trustee in your will
You want to change the scheme of distribution in your will
Substantial changes in your assets or liabilities
Changes in tax laws
Note that unless a will is made in express contemplation of a marriage, marriage invalidates a will. Divorce results in the divorced spouse having deemed to have predeceased the testator (the person that made the will).
Revoking your Will
Under Section 55 of WESA, a will can be revoked by:
Getting married, unless there is a clause in the will specifically saying it is written in contemplation of that particular marriage
Executing a later will
A writing that declares an intention to revoke the will, executed in accordance with the Wills Act
Destroying your will yourself or someone destroying it for you in your presence and by your direction with the intention to revoke it
Consequences of Dying Without a Will
When a person dies in BC without a will, that person is said to have died intestate. Where a person has died leaving a will which does not fully dispose of his or her estate, he or she is said to have dies partially intestate.
Spouse and no issue
Entire estate to spouse
Spouse and one or more child or issue of deceased child
To spouse: first $300,000, household furnishings, estate for life in matrimonial home, residue: one half to spouse & one half to issue per stirpes
Spouse and child from prior marriage
To spouse: first $150,000, household furnishings, estate for life in matrimonial home, residue: one half to spouse & one half to issue per stirpes
Issue (no spouse)
To issue, per stirpes
Father and Mother
Equally to parents, or surviving parent
Brothers & Sisters
Equally to brothers & sisters; if a sibling has died leaving a child or children, such child takes parents share by representation
Nephews and Nieces
Equally, with no representation by the children of a deceased nephew or niece
Other next of kin
Equally among next of kin of equal degree of consanguinity, no representation
Kindred or half blood
Inherit equally with kindred of full blood
Property Affected by a Will/Intestacy
Only property which forms part of the deceased’s estate will be distributed under the terms of the will or under the scheme of intestate succession;
Property which is subject to the terms of a will is said to “pass” by the will and, generally, includes all assets over which the client has complete control and beneficial interest, including:
Tangible personal effects (furniture, artwork, jewellery and cars);
Intangibles (stock, bond, investment certificates, bank accounts); and
Real estate interests (fee simple or leasehold).
Property Not Affected by a Will/Intestacy
Property which does not “pass” by a will or is not subject to the scheme of intestate distribution is property which the client may own but which is nonetheless distributed by operation of law upon death.
Such assets do not form part of the deceased’s estate upon death and are distributed in accordance with the applicable legal rule, for example:
Proceeds of a life insurance contract pass to the beneficiary designated under that contract by virtue of the Insurance Act;
A refund of premiums contributed to an RRSP, RRIF or pension plan pass to the beneficiary designated under that plan by virtue of the Law and Equity Act;
Property otherwise subject to contractual obligations which limit the client’s right to alienate the property (i.e. a marriage agreement, separation agreement, shareholder’s buy-sell agreement) pass under the terms of that contract;
Gifts of property which are conditional on death pass to the donee;
Property subject to the Family Relations Act may pass to the surviving spouse directly;
Property subject to an equitable claim, such as a constructive trust; and
Property held in joint tenancy may pass to the surviving joint tenant by operation of the right of survivorship, depending on the facts at hand.*
*Note that an adult child of a deceased who holds assets jointly with the deceased cannot rely on a presumption that the deceased wanted the child to take the asset at death. The Supreme Court of Canada has recently clarified rules and limitations regarding the treatment of gratuitous transfers of assets from a parent to their child.
The presumption of advancement is limited to transfers by a mother or father to a minor child. The presumption of resulting trust operates in all other transfers without consideration. In the absence of evidence to the contrary, assets held jointly with an adult child will be deemed to be held in trust for the estate and governed by the provisions of the will or intestate legislation as applicable.