In my last blog post, I discussed the reasons why parents of young children need to have valid Wills in place. While it is true that parents of young children have particular concerns regarding the care and custody of minor children, I would argue that everyone needs a Will, whether single or married, with children or without, young or old, wealthy or just starting out. But every day I come across people who don’t have a valid Will. (I say valid because some people have Wills which, unbeknownst to them, are no longer legally valid. That’s a topic for another blog post).
Why are people so reluctant to plan for death? After all, the only certainties in life are death and taxes (and taxes payable on death!) Some people think it’s morbid to plan for death. Others believe they don’t need a Will because they don’t own anything of value or their family gets along well and will “do the right thing”. Finally, many people I have spoken with, both personally and professionally, have misconceptions about what happens if they die without a Will. This blog post will help demystify what happens when a person dies intestate (without a Will) in Ontario.
Here are 10 facts about dying intestate:
No one will have authority to act for your estate. An executor derives his or her authority from the Will. Where there is no Will, someone has to apply to the Court to be appointed as your personal representative. Until such time, no one will be able to pay your bills, file your income tax returns or access your money. Normally, your closest relative will be appointed as your personal representative (unless there are competing applications, which will cost your estate lots of money!). This may not be the person you would have wanted to deal with your affairs.
The law decides how your estate is distributed. Under current legislation, if you have a legal spouse and no children, your spouse will inherit your entire estate. If you have a legal spouse and children, your spouse will receive the first $200,000 and the remainder of your estate will be split between your children and your spouse (if you have one child, the remainder will be split evenly between your spouse and your child, and if you have more than one child, your spouse will receive 1/3 of the remainder and your children will split the other 2/3). If you have no legal spouse or children (or grandchildren), your parents will inherit everything. If you have no legal spouse, children or parents, your siblings will inherit everything. If you have no living next of kin, your entire estate goes to the Ontario government. This is probably not what you would have wanted.
Common-law spouses do not inherit your estate or even a portion of it. Under the Succession Law Reform Act (the legislation that governs intestacies in Ontario), common-law spouses are not entitled to any portion of your estate!
Your children will receive their inheritance when they turn 18. As I discussed in my previous blog post, minors are considered persons under disability and cannot deal with their own property. If a minor receives more than $10,000, the funds must be paid into Court to be managed by the Accountant for the Superior Court of Justice. If your guardian (which you didn’t choose!) needs money for your children’s healthcare, education, extra curricular activities, etc., they will need to ask the Court to release funds. And when your children turn 18, they will be handed a cheque for the full amount of their inheritance. I don’t know about you, but most 18-year-olds I know are not equipped to handle large sums of money responsibly.
A dependent child or other relative may not be properly provided for. Unless a provision is made in your Will, a dependent child who needs long-term care may not receive the financial support you were hoping to provide. In addition, if a child or other relative is receiving government assistance, such as Ontario Disability Support Program (ODSP) payments, and they receive a large inheritance, they may no longer qualify for government support. There are ways to provide for a disabled beneficiary without jeopardizing their income support payments, but you need a Will to do so!.
Someone else will decide who will become the guardian(s) of your children. If you are the primary caregiver for your minor children (and the other parent isn’t around) and you die without a Will, you lose the opportunity to specify who you want to act as your children's guardian. The court will make the decision without your input.
Personal items may not be distributed as you would have liked. That family heirloom that has been passed down from generation to generation may not go to your children, as you would have wanted. Your personal representative will have the discretion to distribute your personal effects (your "stuff") as they see fit.
Possible tax savings may be lost. Comprehensive estate planning can minimize the taxes paid by your estate on your death. There are opportunities to defer capital gains tax that arises as a result of the deemed disposition of your capital property on death. There are also ways to reduce estate administration tax ("probate fees"). When you die intestate, you cannot take advantage of any tax-minimization/deferral opportunities.
Your beneficiary’s Inheritance will not be protected from a separated spouse. Under the Family Law Act (Ontario), if a spouse receives an inheritance during the marriage, and the couple later separates, the inheritance and any income earned on it, will not be subject to division in the event of marriage breakdown. In other words, your beneficiary will keep it all. But this only applies IF you say so in your Will.
Less money will be available to your beneficiaries. It costs more, takes longer and is more difficult to administer an estate when a person dies without a Will.
In summary, the costs and time involved in preparing a Will is far less than the costs of dying without one. Want to plan for the inevitable? Get in touch today!