On Topic


The fate of dying without a will

Dying without a will leaves distribution of assets to provincial law. If one dies without children and is survived by a spouse, then in every province the spouse inherits everything. If there are children and no surviving spouse, then in all provinces the children get everything. If there is a spouse and one child, then rules differ by province. In Manitoba, the spouse still gets everything except that if the child is not the child of the surviving spouse (that is, the child is a stepchild), then the spouse gets half the estate to $50,000 and splits the rest with the child. In the same situation of a surviving spouse and one child, Newfoundland and PEI divide all assets equally, Nova Scotia follows Manitoba’s rule, New Brunswick awards belongings to a spouse and splits everything else equally, Québec awards a third to the spouse and 2/3ds to the child, and each province west of Manitoba varies the amount for the spouse from $40,000 in Alberta to $100,000 in Saskatchewan.

A will can ensure that those who deserve, get. It also ensures that the provincial trustee does not intervene and hold money for a minor to be handed over in full when the child reaches 18. Provincial official trustees have a record of serious misadministration of assets. All these problems can be anticipated and avoided by a will that, for example, puts money into a trust for distribution in thirds when the heir turns 18, 25, and 30. Even where a will designates minors as beneficiaries, if there is no provision for a trust then a provincial trustee may be appointed to act until distribution when the child reaches his or her legal majority. Provincial trustees may even withhold assets from distribution to a child until its majority on the theory that providing food and shelter are the responsibility of the surviving parent. Good will drafting anticipates these problems and prevents control of assets from slipping away from one’s designated executors and trustees.

Dying without a will also means that the estate will be hit with fees for a court-appointed executor called an administrator in an extended period of probate when assets cannot be distributed. Dying without a will can also result in exposure to high levels of taxation on accrued capital gains that are deemed by law to be realized or sold at the time of death. The time for probate under administration can be longer than when assets are under the control of an executor, for the administrator cannot act until appointed by a court while the executor can act from the date of death.

There are fill in the blank kits available on news stands and one can write a so-called holographic will if the document is entirely in the hand of the decedent. Farmers’ wills written in contemplation of death on a tractor fender after an accident in the field have been held valid, but only after costly court fights. It is far better to have a will in place, drafted by counsel familiar with this branch of law, reviewed by an accountant for tax implications and analyzed by a financial advisor or planner for its investment implications. Whether a family firm should be sold to pay taxes or marketable stocks and bonds liquidated to pay taxes and ensure continuity of the family firm is substantially an issue of which has the higher and more predictable return. This is where investment decisions have to be made.

Careful drafting is essential

Before heading off to a lawyer, it’s essential to know your own mind and what future you want for your heirs. Leaving money or goods to individuals has to be done with a view to how assets will be used and invested. More than a few wills have failed in their purpose where a sum of money, which may have seemed reasonable at a time - say a $100,000 bequest to a favourite aunt, winds up being a huge chunk of a fortune that was $1 million when the will was drawn but that shriveled in a bear market to $500,000. In that case, there may not be enough money left to provide for the education of several children, each of whom intends to go to university and graduate or professional school. Had the will been drafted to leave "the lesser of 10% of my estate or $100,000 to my dear aunt Teresa", that would not have happened. Wisdom may be in hindsight, but it is better in the planning.