Expanded Horizons: Drafting a Will to Define Your Legacy

The start of a new year represents a fresh start and, for many of us, the making–and breaking–of resolutions. The most popular resolutions are led by a desire for a healthier lifestyle or stronger relationships. These aims are admirable, of course, but an additional resolution can be offered for 2018: protect your family.

Every family should be adequately covered for the financial implications imposed by a sickness or premature death. It is also imperative that you have an up-to-date Will in place. This is true whether your family is just starting out or you are well into retirement and have amassed significant assets. The reality is that only half of Canadians have a written Will and significantly less have a Will that is up-to-date.

A Will not only legally protects your spouse, children, and assets, it also provides guidance as to how you would like things to be handled after you are gone. The alternative, passing away without a Will, relies on provincial intestacy laws to determine how assets are divided. While every province differs, the general rule is that the spouse and children receive preferential treatment and often share a portion of the estate. This is typically followed by the deceased’s parents and then siblings. Distributing assets in a manner established by provincial rules is often creates dissension and leads to a greater number of billable hours for lawyers–especially for larger estates.     

 

Other Important Elements:

  • Deciding who will take care of minor children. If you have a young family, chances are you have already had this conversation. Did the conversation touch upon the belief system and capabilities of the person who would be best suited to raise your children in the event that you pass away? Is the person you have in mind a family member? Without direction within a valid Will, the courts are forced to choose among family members and anyone else who might petition the courts for guardianship. 
  • Deciding who will handle the affairs of your estate. The administrator of one’s estate is referred to as the executor or executrix (hereafter referred to as executor). The role is critical and understandably difficult given very few people act as an executor on a regular basis. In addition to cancelling credit cards and paying bills, the executor must also manage the assets until they are distributed. The executor may be required to manage these assets for a period in excess of a year, making it extremely important to select someone who is trustworthy, honest, organized, and open to seeking advice. Remember tomorrow’s executors will likely be asked to deal with assets not in existence today–think about the emergence of Bitcoin and other cryptocurrencies, for example. Without a Will the court must either appoint an Executor or transfer the responsibilities to the public trustee. 
  • Deciding who will (or will not) receive specific assets. Without a valid Will the distribution of assets occurs vis-a-vis a predetermined formula established by the individual provinces. To complicate matters further, it is possible that the intention is not to split the estate equally. This often occurs where a business is involved or in farming families. Did the other heirs receive part of their inheritance early, perhaps in the form of tuition for post-secondary education? What about intentionally disinheriting an heir? These situations might sound easier than they actually are to deal with due to a trend in provincial legislation allowing heirs to challenge the estate. If a person feels unfairly treated, he or she may bring the matter to court and perhaps the courts will “rectify” the situation. Challenges lengthen the time to settle the estate and can create situations not intended by the deceased. A Will provides clarity to the wishes of the deceased and can prevent or minimize unintended situations.     
  • Minimizing the tax liability. The next decade will see the largest transfer of intergenerational wealth in Canadian history–an estimated $750 billion.[1] Corporations and real estate form a significant portion of this wealth and make no mistake that the government is well positioned for their “share”. It has been said there are three parties to your estate–family and friends, charities, and the Canada Revenue Agency–and you get to pick two. This is an oversimplification, but useful in getting the point across: with proper planning you can minimize the CRA’s share of the estate. A valid, up-to-date Will provides the executor with the instructions on handling the estate. Without guidance to the contrary the CRA is guaranteed to maximize its share. The first step is to take stock of your existing assets and their associated tax liability. Numerous programs are available and the guidance of a trusted advisor can help you to gain a clear financial picture. From that point solutions will emerge to minimize the CRA’s share, ensure liquidity, and to make certain that your heirs are treated fairly.   

 

Life is hectic, with any number of things demanding your attention. Whether you have a Will in place or are in need of one, make this the year to get it right. Your family deserves to be protected. Contact your advisor today.


January 2018

This article was provided courtesy of Chris Geldert, CPA, CA, CEA. 

Chris Geldert joined Financial Horizons Group in 2013 and is excited to be able to continue providing first class resources advisors should come to expect from their MGA. As a Chartered Accountant with over a dozen years in the insurance industry, Chris works to bridge the gap between client’s professional advisors. From developing and presenting strategies, to providing independent recommendations on products suited to the client’s needs and risk comfort levels, Chris works to assist advisors grow their practice. 

The writer can be contacted at:

Disclaimer: This article is intended to provide general information only and should not be considered as legal, accounting or taxation advice. Before acting on any of the information contained within this article, or before recommending a course of action, make sure your clients seeks advice from a qualified professional. Any examples or illustrations used in this article have been included to help clarify the information presented in this article and should not be relied on by you or your client in any transaction.


[1] Source: CIBC Economics - The Looming Bequest Boom