Resources Do You Need a Will?

Do You Need a Will?

Learn about why you need a Will.

Many people wonder whether they need a Will. In short, if you have any assets (even just a bank account) or have minor children, you should have a Will. Below are some reasons why.

You choose who will act as executor

Choosing who your executor will be is an important choice. Even in the simplest of estates, it is a difficult job that requires diligence, organization and a level of sophistication. In more complex estates, such as those involving active businesses, and circumstances involving minor children or feuding beneficiaries, the job becomes even more difficult.

In a Will, you can select one or more persons to act as your executors, as well as alternate executors who will act if your initial choice is unable to do so. This enables you to choose your executors based on their competencies and the circumstances.

Without a Will, the court will determine who will act as your executor in accordance with s. 29 of the Estates Act (Ontario). This is typically one or more of a married or common law spouse and children. If you do not have any of these or none of these individuals wishes to act as executor, your next of kin can apply to the court to be appointed as executor.

Another important difference is that you can appoint someone who is not an Ontario resident to act as executor through a Will. A non-resident of Ontario cannot be appointed as executor where there is no Will.

You choose the beneficiaries

A Will provides you with great flexibility in determining who your beneficiaries are. Beyond the initial choice of beneficiaries, you can leave gifts of property or cash to persons, make charitable donations, create trusts and determine what happens if a beneficiary predeceases you (for example, is their share divided between their children or is it simply shared between the surviving beneficiaries).

A common misconception is that if you do not have a Will, your property will go to the government. That's only the case if you die without a spouse, children, parents, siblings or other next of kin. However, there are some unintended consequences which often

  • Common law spouses and step-children do not inherit property (although they may have an entitlement if they qualify as your dependants).
  • If you die without a Will and have a married spouse and children, your children could inherit a portion of your estate. A married spouse is entitled to the first $350,000 of your estate. Anything in excess of this amount is divided between the spouse and any children (equally if there is only one child or 1/3 to the spouse and 2/3 between the children if there is more than one child).
  • Minor beneficiaries cannot receive an inheritance directly. Inheritances of up to $35,000 can either be paid to a parent or person with custody of a child and the person who receives the funds is subject to the responsibilities of a guardian of property of the child. Inheritances in excess of $35,000 must be paid to either a person who is appointed by a court as guardian of the child's property or into court where the funds are held until the child turns 18.

Safeguard Minor Children

If you have minor children a Will is an important tool to help safeguard them in the event of your early death.

As mentioned above, you can create trusts through a Will. Through a trust, you can have your executor or another person hold a child's inheritance and use and distribute the funds in accordance with the terms of the trust. Not only can you ensure the child will immediately benefit from the funds, but you can also postpone the age at which they are entitled to after 18 years old (for example, if you do not think your child will be ready to manage your $10 million fortune when they turn 18).

Without a Will, the inheritance of a minor of up to $35,000 can be paid to a parent or person with custody of the child. Inheritances in excess of $35,000 can only be paid to a person who is appointed by a court as guardian of the child's property or into court, where it will be held until the child turns 18.

Through a Will you can appoint persons who will act as custodians of a child (the person who will look after the child). The appointment is effective for 90 days, after which time, a permanent order will need to be obtained from the court. The person or persons appointed as permanent custodian(s) are ultimately determined by a court. However, by designating the temporary custodian through your Will, you have indicated your preference which is a factor which is considered by the court.

Simpler to Administer an Estate with a Will

It is generally simpler for an executor to administer an estate where there is a Will. An executor's authority to administer an estate comes from the Will. Although some steps cannot be taken without a certificate of appointment of estate trustee, an executor can begin administering the estate immediately. On the other hand, where there is no Will, a person will need to be appointed as executor through a certificate of appointment of estate trustee before the estate can begin to be administered.

Also, where there is a Will, there are circumstances in which the estate can be administered without obtaining a certificate of appointment of estate trustee. In these cases, the court application for the certificate will not be required and your estate will also not be required to pay estate administration tax (see below).

Tax Planning Opportunities

Tax planning can be undertaken with or without a Will through, for example, holding assets jointly and designating beneficiaries on registered accounts and plans.

However, a Will provides some additional opportunities for tax planning. For example, much more detailed beneficiary designations can be made through a Will which, for example, create trusts for children and others, involve more complicated distribution schemes and designated alternate beneficiaries.

Where a person holds shares in a private corporation or has other property of value, such as jewelry or artwork, which can be transferred without the need for a certificate of appointment of estate trustee, making two Wills permits the estate to minimize estate administration tax. Using two Wills, the assets requiring the certificate to be transferred are dealt with by a primary Will and the assets which do not require the certificate to be transferred, such as shares in a private corporation or artwork, are dealt with by a secondary Will. A certificate of appointment of estate trustee is only obtained for the primary Will. As a result, estate administration tax is only payable on the value of the assets that are dealt with by the primary Will.

Peace of Mind

In my experience, clients report feeling a sense of relief and peace of mind once their Will has been made. This comes with knowing that your affairs are in order. Without a Will, you just won't get that feeling.