What Is a Will?
A will is a written document that comes into effect on your death. In it you state, among other things:
- Who you want to care for your children (called guardians);
- Who you want to give your money, belongings and property to upon your death (called beneficiaries)
- Who you want to be in charge of distributing your money, belongings and property (called an executor/ executrix).
There are two types of wills: a formal will and a holograph will. A formal will is one that you write, fill out, or type or that someone else writes, fills out, or types on your behalf. You must sign it in front of two witnesses who are together with you at the same time. The witnesses must also sign the will in front of you and each other. The witnesses cannot be persons receiving your money, belongings, or property in the will. They cannot be the husband, wife, or live-in partner of anyone receiving anything in your will. You can use a preprinted form to make a will as long as it is properly completed and witnessed. Generally, lawyers prepare formal wills. Most lawyers will prepare a straightforward will for a very reasonable fee. Contact your lawyer or Lawyer Referral Service for more information.
A holograph will is one which you handwrite yourself. You must handwrite the entire will and sign it at the bottom. This type of will does not need any witnesses. If you die without a will or if the will you have done is not done correctly, your money, belongings, and property will be distributed according to the Intestate Succession Act. This Act lists the family members who will receive your money, belongings, and property on your death. If you do not have any family members, your money, belongings and property will go into a fund run by the government.
Note: In 2012, the rules for making wills will change with the new Wills and Succession Act.
Who Can Make a Will?
Anyone eighteen years or older who is mentally competent may make a will.
If you are not eighteen, but you are …
- now or have been married or you have had a live-in partner;
- a member of the Canadian Forces and were placed on active service under the terms of the National Defence Act (Canada);
- a mariner or seaman in the course of a voyage;
… then you may be able to make a valid will. Check with a lawyer to see if you fit into one of the above categories.
Do I Need a Lawyer?
If you …
- have complicated family issues;
- have a complex estate;
- wish to appoint guardians for your children who are under eighteen years of age (minor children);
- want to leave money, belongings and property to your minor children;
… then consider seeing a lawyer who will advise you and prepare the will for you. However, it is not essential to involve a lawyer if you wish to make a few straightforward gifts to other friends or family members who are adults or to charities. You can make your own formal will and have it properly witnessed or write a holograph will.
What Do I Need to Think About When Considering My Will?
1. What is my “estate”?
When you die, certain things you own are gathered together to form your estate. Your will then states how your estate is to be divided among the people or charities you choose. You may own personal belongings, cash, bank accounts, a house, or other property (all are assets). Some of these assets may form part of your estate and be distributed according to your will. Some of them may pass to other people outside of your estate and are not necessarily addressed in your will.
1. What property will pass outside of my estate and my will?
There are three main types of assets that pass outside of your estate and will not pass through your will when you die:
Jointly-held assets if the other joint owner survives;
- Registered accounts (eg. RRSPs);
- Life insurance benefits.
Property which is held or registered jointly in your name and the name of one or more other persons or corporations will not become part of your estate unless the other joint owner dies at the same time and, even then, only in certain circumstances.
If property is registered as joint tenants and one of the owners dies, the surviving person gets full ownership. Often, couples register their homes in their joint names. When the husband dies, the wife becomes the sole owner of the home and vice versa. There is nothing to gift in the will if only one dies. Joint property can be included in your will but will only pass to the beneficiaries you choose if the other joint owner dies before or with you and, even then, only in certain circumstances. Joint owners should consult with a lawyer to consider how to coordinate their wills if they die together or what happens if the survivor dies. Joint ownership is different from tenancy-in-common, where there is more than one owner of a property but each owner holds a certain percentage of the property. In that case, each tenant-in-common owns their separate property and it will be included in their estates on death.
If you have a joint bank account, you should check with your bank to find out whether the account is truly a joint account or if it is a co-ownership account. If it is a joint account, the surviving partner will be the sole owner of the account upon the death of the other partner. If the account is a co-ownership account (both joint and co-ownership would allow both of you to make deposits and withdrawals and write cheques), the account will be frozen if one or all of the account holders die or become mentally incompetent. Check with your bank manager to find out what will happen to your account.
Think carefully before registering any asset in joint names as there are other advantages and disadvantages you should consider. A lawyer will be able to advise you which form of ownership is best for you and how it impacts your will and estate.
Typically, registered accounts (such as RRSPs) and life insurance proceeds will pass directly to the beneficiaries you named in writing when you opened the account or purchased the policy. You can typically change those beneficiaries any time provided you do so in writing. However, seek the advice of a lawyer before naming young children (under eighteen) as beneficiaries of registered accounts or life insurance policies as those children will not be entitled to the funds until they are eighteen years old and someone will have to manage the funds until that time. If not set up properly, the Office of the Public Trustee (a government department) will step in to manage the funds until the children turn eighteen.
3. What property do I own that I can gift in my will?
Any property which is registered in your name alone or is in your sole ownership or sole possession will form part of your estate and should be included in your will. This will include, among other things, personal belongings, bank accounts in your name alone, property registered in your name alone.
If you own jointly registered assets and the other owner dies before or with you, then under certain circumstances those assets will pass to you automatically and form part of your estate. Those assets should be included in your will but with the understanding they may pass through your will if the other owner does not survive you.
Registered accounts and life insurance proceeds may also pass through your estate if: (a) the beneficiary you named when you opened the account or purchased the life insurance has died before or with you, (b) if you have named your estate as the beneficiary, or (c) if you did not name a beneficiary at all.
4. Who are Guardians and what is their role?
If you have minor children (under eighteen years of age) you should appoint Guardians in your will. The Guardians will be responsible for the day-to-day care of your minor children until they are eighteen years of age. They effectively step into your shoes to parent your children.
5. Who is the Executor and what does he or she do?
In your will you should appoint someone as the Executor/Executrix. This person is responsible for, among other things, gathering up your assets, paying your debts from them and then distributing what is left to the beneficiaries you have chosen. This is a significant job and you need to choose someone who is responsible and who you trust.
If you have minor children or think your children should be older before getting a gift under your will (eg. twenty-one or twenty-five years of age), the Executor is the person who looks after the children’s funds until that age. In that role, the Executor is also called a Trustee as he or she is holding funds for someone else. All assets left to children must be held until they are at least eighteen. Therefore, your will should give the Trustee authority to give funds to the guardian for minor children’s benefit; for example, education, necessities and medical care. There are strict laws affecting the way a trustee can invest or use the child’s share of the estate. It cannot be squandered or given away. A lawyer could advise you further on this.
The Executor(s) and Guardian(s) can be the same people or different people—that is up to you.
6. Who should I consider as Beneficiaries?
You should consider your husband or adult interdependent partner (a partner you have lived with for at least three years and/or have a child with). If you are single or have children from another relationship, you should consider your minor children as beneficiaries. Under law, you have certain obligations to look after these people in your will. You should also consider your adult children. However, under law, you only have obligations to your adult children when they, because of a disability, cannot earn a living for themselves.
You may also consider other family members, friends and charities. You may gift certain items (eg. your car), you may give a certain sum of money (eg. $500), you may give a certain portion of your estate (percentage) or you may give the entire estate or what’s left of it to one individual or you may divide it up equally amongst a number of individuals.
What Happens If I Die without a Will?
If you die without a will, your property and possessions will be disposed of according to the Intestate Succession Act (in 2012, it will be called the Wills and Succession Act). This may not be the way that you wanted things to be done. Time may be lost and expenses incurred in trying to locate all of your possible beneficiaries. Friends or loyal employees or your favourite charities would get nothing from your estate unless they are named in a will. On the other hand, relatives to whom you may not want to leave part of your estate could benefit under the Act. Remember, the beneficiaries and their share of your estate is set by law unless you set those things by a will.
If there are no eligible beneficiaries, the law requires your estate to go to the Crown (Province of Alberta) to be used for education and research purposes. Without a will, the government official known as the Public Guardian or some person you may not approve of could apply to the court to become guardian of your children who are under eighteen. It is important that parents of minor children have a will and name a suitable person to be the guardian of those children.
You may have some property which you would like to remain in your family (or in the same state to be passed on to other people); for example, shares in a family business or heirlooms. If you have a will, you may name the persons who are to receive these things. If you do not have a will, those items may have to be sold.
Many women think that, because they do not have many valuables or children, there is no need for them to worry about a Will. Even if your possessions have only sentimental value, a will ensures that these valuables will be left to someone who appreciates them. Wills are particularly important for women who have children from a previous marriage, because your children could be left with nothing if you die without a will. Circumstances can change very quickly so it is wise to have a will that is up to date.
What If I Am Left Out of My Husband’s Will?
If your husband or adult interdependent partner dies and leaves you and/or your children out of his will, you can apply for help under the Family Relief Act (in 2012, it will be called the Wills and Succession Act). The court can take part or all of his estate and give it to you and your children, but any remainder will be distributed according to your husband’s will. In some cases, the share that you receive may be inadequate for your proper maintenance and support. If your marriage broke down before your husband’s death, you might also be able to apply for your share of his property under the Matrimonial Property Act. Consult a lawyer about this.
If My Spouse Dies, Are There Any Other Benefits to Which I Am Entitled?
Yes, the federal government has a program for Survivor’s Benefits and Orphan’s Benefits. Apply through the office of Canada Pension Plan to receive this.
Do I Have to Pay Tax on Property I Inherit?
Sometimes a government imposes a tax on the value of property which is transferred from the deceased’s estate to the beneficiary. This tax is called a succession duty or estate tax. Alberta has no succession duties. Quebec is the only province in Canada that still has succession duties. The federal government may charge income or capital gains tax on certain property in an estate. When preparing your will, you should consult with your lawyer and/or accountant to find out what the tax consequences will be of different assets. Often, there are ways that you can plan your estate to reduce or delay tax that you are required to pay during your lifetime until your death. Whether or not you must pay tax will depend on what kind of property you have.
If you die and your spouse survives you, it may be to his advantage for your executor to make a contribution for him to a Registered Retirement Savings Plan for the year of your death. Contribution to the plan is subject to the conditions set for RRSPs, such as how much income you earn from January 1 in the year of your death to the date of your death, and provided that the contribution is made within a certain time from the date of your death.
Estate planning is particularly important for farmers. You want to ensure that after your death the farm and its assets will transfer to your beneficiaries without an unnecessary disruption of the farm operation. Some farm assets are subject to tax and others are eligible for various deductions. Check with your lawyer and/or accountant to determine if there can be a tax-free rollover of the farm and its assets or part of its assets to your beneficiaries.
When Can I Challenge the Validity of a Will?
Certain conditions are necessary before a court will declare a will, or part of a will, to be invalid. You would have to show that there was undue influence in drafting the terms of the will, that the person making the will was mentally incompetent at the time, or that the will was not properly made. A will can also be varied, in whole or in part, under the terms of the Dependants Relief Act (2012, the Wills and Succession Act). In order to make a challenge under the Dependants Relief Act, you must be acting for a child under eighteen years, or one who was still financially dependent on the deceased because of mental or physical disability. Or you must have been married to the deceased or an adult interdependent (common-law) partner of the deceased.
Under Alberta law, you could be disqualified from claiming assistance from your husband’s estate, if the judge is of the opinion that the character or conduct of a dependant disentitles the dependant to the benefits under the Act. However, you might still have a claim under the Matrimonial Property Act.
There are specific rules for the proper signing of a will; therefore, a challenge to a will based on a failure to obey those rules should be straightforward. It is far more difficult to show that there was undue influence or mental incompetence at the time of the making of the will. Undue influence means that the person making the will did not have a real free choice when she decided how the estate would be divided. A lack of choice or free will could arise because the person was forced, badgered, intimidated, harassed, or encouraged to put certain terms or gifts in a will by someone who had a lot of emotional, mental, or physical control over the person making the will.
Claims of mental incompetency usually require medical evidence. Claims of undue influence and mental incompetency are very complicated and each situation must be looked at individually since no set rules will apply.
Effect of Marriage/Divorce on a Will
For now, a will drawn up before you are married is no longer valid once you marry, unless the will was written with marriage to that very person in mind and says so specifically. It is important for you to make a new will after you marry. After the new rules come into effect (expected in 2012), this will not be the case.
For now, divorce does not automatically void your will. However, you should consider making a new will during separation and/or after a divorce. After the new rules come into effect (expected in 2012), a gift in a will to a former husband, wife or live-in partner will not be valid unless the will is very clear that this was intended after the divorce.
Check with a lawyer if you are making a will prior to marriage or if you are getting divorced.