Secure your legacy: The importance of ‘Make-a-Will Month’

Originally published on Law360^TM Canada (www.law360.ca), part of Lexis Nexis Canada

November is “Make-a-Will Month” – an opportunity to highlight the critical importance of having a Will. With almost half of Canadians lacking a Will, it is vital to raise awareness about how this document can protect families and ensure that wishes are respected after death, especially for individuals with significant wealth or other complexities.

There are numerous reasons to make a Will and Estate Plan. We have highlighted some key considerations.

1. Avoid Leaving a Mess for Your Loved Ones

   Losing a loved one is always a challenging time. Without a Will, families face additional stress when left without clear guidance on how to manage and distribute the estate of their loved one. A Will serves as a roadmap for your chosen representatives, helping to minimize conflict and confusion.

   Your Will allows you to appoint an executor you trust and who has the right skillset to manage  your estate. It also allows you to determine how your estate will be distributed, and to specify any particular gifts you may wish to leave to certain individuals and/or charities.

   In today’s legal landscape, increased regulations make it difficult to administer even a well-thought out and properly drafted Will. A poorly drafted Will can lead to interpretation issues and family rifts, while incomplete or outdated records of assets can cause significant delays.

   There are potentially even further risks involved for individuals with significant wealth; estates with diverse asset classes, beneficiaries in different jurisdictions, or blended family structures require careful planning. Without a Will, loved ones may face prolonged delays in accessing assets, or may be eligible to receive less (or sometimes nothing at all) adding further hardship to the entire family.

2. Take Advantage of Tax Minimization Opportunities

   Effective estate planning can reduce the tax burden on your beneficiaries. In other words, failing to make an effective plan, that takes into account tax planning, could have the result of decreasing the value of the inheritance your loved ones receive.

   A qualified solicitor can assist in your estate planning to maximize any tax deferrals available, preserve access to the principal residence exemption on certain real estate properties you may own, and other potential income/capital gains savings that may be relevant. There are also probate minimization strategies to minimize the amount of probate fees (referred to as estate administration tax in Ontario) payable and facilitate faster access to your assets for your beneficiaries following your death. Probate is a legal process that may be required to access certain assets that form part of an individual’s estate. There are legal fees involved as well as a tax of about 1.5% of the value of the assets being probated. Some individuals, with proper planning, can avoid the probate process altogether, resulting in savings flowing to their beneficiaries’ pockets. If the deceased did not have a valid Will, probate can not be avoided and is often more complicated, time-consuming and expensive, than where there is a valid Will.

   High net worth individuals may benefit from transactions that shift future gains to the next generation.

   An estate planning legal expert can guide you through this analytical process and make recommendations in consideration of your familial goals, while also taking into account planning opportunities that may be available to align with your specific circumstances.

3. Decrease Surprises and Increase your Peace of Mind

A properly drafted and executed Will reflects your wishes and provides the peace of mind that comes with trusting that your assets will be dealt with in an effective way and in line with your intentions.

The requirement to probate a Will is a common surprise that arises in the context of many estate administrations. In particular, for individuals in Ontario who own shares of certain private corporations, executing a separate corporate Will can circumvent probate on the value of the corporate shares. For most business-owners in Ontario, this commonly applied strategy results in significant savings to the estate. When an individual dies without a separate corporate Will, or without a Will at all, and has shares of a corporation, their executor and beneficiaries are disappointed when they learn of significant probate fees they are required to satisfy which could have been easily avoided.

Other common surprises include:

• The requirement for an estate to file United States Form 706NA. Some estates could have a US filing requirement even though they are not American and do not own any US real estate at death.  A Canadian resident (who is not a US citizen or green card holder), whose estate exceeds certain threshold values and who holds certain US investments (e.g. directly owning shares of Facebook, even if held through a Canadian brokerage account), may need to file this form within a strict deadline. The filing is very detailed and requires significant disclosure to the United States’ Internal Revenue Service. U.S. estate tax can also apply if the deceased’s wealth exceeds certain thresholds.
  
• Personal articles (i.e. household items, cars, artwork) may not be as high ranking a priority during the planning process for some, but can end up causing a disproportionate amount of time and expense in addressing after death. Personal articles typically have a lower monetary value relative to other estate assets, but can cause unnecessary complication and stress without sufficient instructions in the Will for distribution and flexibility for the executor to carry out the distribution process.
  

A routine review of your Will is highly recommended to ensure it reflects  your current wishes, particularly following any major life changes that you may have experienced.

While having a Will is crucial, Powers of Attorney (POAs) are equally important. POAs come into effect while an individual is still living. You should appoint a representative you trust and provide clear instructions as to how they should manage your wealth for you and your dependants during your lifetime in the event you become incapable of managing your wealth yourself. If you do not have a POA and become incapacitated, you will no longer be in a position to choose who to appoint as your representative. The process to have one appointed then becomes expensive and time-consuming, as it will generally require a lengthy court process and legal representation. Access to assets may be inaccessible during this period and the appointed person may end up being someone who would not have been your first choice to appoint. This can result in an additional burden on those who care for you, and questions surrounding who is entitled to apply in priority to others can lead to familial conflict.

Use Make-a-Will Month as motivation to take the time to plan for the future and protect your loved ones, reduce stress, and ensure your wishes are respected.