No Will? No Way!

Dying without a will is described by the term INTESTATE.

When one dies without a will, the laws of the province in which they live, determine how their estate is distributed. Not very often does this provincial ‘plan’ mirror an individual’s actual wishes. Having no will (intestacy) also means a lengthy delay in settling the person’s estate simply because involving Government officials in anything (in this case to do with winding up an estate), simply slows things down.

Here are a few things to know about dying without a will:

  • A spouse does not automatically inherit all of the person’s property.
  • A spouse does not have the right to decide how property should be divided among the children, or at what age they should receive their inheritance.
  • A spouse does not have the right to pick a person to be responsible for handling all of the estate arrangements.
  • Next-of-kin also, do not have the right to decide how to divide up and estate, EVEN for the purposes of minimizing taxes.
  • Distributions are not decided individually by a judge but by rigid provincial statutes.
  • An estate with no will is permitted by law to have its distribution delayed up to one year from the date of death.
  • Provincial laws pertaining to distributions of an intestate estate may change at any time.

Here’s an example of how things in Ontario are currently distributed according to the Succession Law Act:

Where only a spouse exists: Entire estate to the spouse

Where a spouse and one child exist: The first $200,000 goes to the spouse. Of the remainder, one half goes to the spouse and one half to the single child.

Where a spouse and multiple children exist: The first $200,000 goes to the spouse. Of the remainder, one third goes to the spouse and two thirds go to the children, divided equally.
Where no spouse exists but children do: All living children share equally.

Where no spouse or children exist: The estate goes to living parents or surviving parent.

There are formulas that handle descendants and relatives conceived but unborn, children born outside of marriage and other iterations.

These general considerations reflect how the law as it currently exists, would not likely reflect your personal wishes. But there are more reasons to avoid intestacy:

  • Your estate may be left in legal limbo, possibly delaying settlement and causing additional legal fees.
  • your family could be left without income, resulting in considerable difficulty or even hardship for your spouse and children.
  • Your spouse’s hands are tied financially when it comes to raising your children. The children’s share is paid into court and administered by government authorities until that child reaches the age of majority. At that point the child automatically receives it all.
  • A home or other assets could be sold under unfavourable market conditions, resulting in a lower potential estate.
  • Heirs could end up paying taxes that could otherwise be reduced or deferred.
  • Children could be placed in guardianship that you might not have chosen.

A properly constructed will ensures that you can divide up your property specifically amongst and for the benefit of those whom you wish to recognize. It also helps protect the value of your estate. Do you have yours? It also helps save hardship and confusion for your survivors upon your death.

(Source: Jonathan Flawn CA CFP CLU, Page and Associates)