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Wills and Legacies

Legacies & Bequests

Wealth transfer strategies, with a Will /with no Will on death.

The meat of the will is ‘who gets what’.  There are two primary strategies for setting out who gets what from your estate:

  • The ‘pool then split’ strategy, which involves pooling all assets, paying all expenses and all specific bequests, and then dividing the monetary value of the balance (the residue) among the beneficiaries in ‘shares’; or
  • The ‘named gift’ approach, which involves giving specific assets (or the proceeds from specific assets) to specific beneficiaries.

For instance:

“give my daughter, Jane, my RRSP, and give my son John, my house” is a ‘named gift’ or ‘specific bequest’ type of disposition.

“sell my assets, pay my debts, and then divide the residue equally between my daughter Jane and my son John” is a ‘pool then split’ approach.

Warning

Generally, the ‘pool then split’ approach has a much higher chance of being ‘fair’ or ‘in keeping’ with your original intentions, because the ‘named gift’ approach often fails to deal with who pays what debts and expenses (such as taxes and executor fees).  For instance, in the example above, if there were no other assets besides the RRSP and the house, all the executor fees would be paid by Jane from the RRSP and none by John from the house.

Don’t Over-Complicate

Complex legacies can really complicate the process of applying for probate, and administration of the estate.

Gifts To Minors

We understand the desire to leave a legacy directly to some children, especially grandchildren.  However, gifts to children make a) probate, and b) estate administration considerably more difficult and expensive.   Any gift over $10,000 requires getting the Office of the Children’s Lawyer involved, and lengthy trusts can impose on the trustee (often the executor) long term duties to manage money for the children.  To reduce cost and hassle consider gifts that take the form of contributions to RESPS or directly to a parent of the child.

Philanthropy

Bequests to charities are a fundamental part of estate planning.  We recommend them.  However, some key points to consider include:

  • Make sure that you identify the charity properly; use the full proper legal name.
  • Make the gift clear and simple.
  • Get advice to make the gift tax efficient.
  • Consider making gifts before you die – that way you can be certain that they are made right, and you get to see your donation in action.

Lapses

A lot can happen between the time you make your will and when you die.  Some of your beneficiaries may pre-decease you.  Do not assume that everyone younger than you will outlive you.  It is very important to structure your legacies in a manner that provides clearly, for all aspects of the estate, what happens if any beneficiary pre-deceases you.  If you do not, you risk creating a partial intestacy for your estate.

Inheritance – no will

  • The distribution of the estate (who inherits what) is fixed by statute (the Succession Law Reform Act, or SLRA).
  • The SLRA sets out a fixed distribution, with a preferential share of $200,000 to the “spouse” (if the deceased was married) and then thereafter, the estate is shared between the spouse and surviving children. [The SLRA provides for further distribution if there are no surviving spouse or children]
  • The SLRA can easily result in a distribution that is very different from what you might expect.

No will & no marriage – common law spouse gets nothing.

Currently, in Ontario, when there is no will, a common law spouse (i.e. not formally or legally ‘married) has no right to inherit anything from their deceased partner, and, has no right to equalization under The Family Law Act.  This applies even if the two common law spouses had children together, and even if the common law spouse is the estate trustee (see above).

Joint accounts when there is no will

You should not assume that the use of ‘joint accounts’ and placing assets like houses ‘in joint tenancy with a right of survivorship’ solves all problems (such as avoiding probate and probate fees). This is only an effective way to dispose of assets if the intent was to make a gift to the other joint owner.

Joint bank accounts with adult children - be careful

With joint bank accounts held by a parent and adult child, the burden of proving that a gift was intended lies on the surviving adult child. If this burden is not met, the asset will belong to the estate of the deceased and must be probated, administered, and distributed in accordance with the SLRA.  If you intend to make a gift of cash or investments, put it in writing.

Milton Estates Law, Ontario Canada.


*Mutual funds distributed through Desjardins Financial Security Investments Inc.

As an advisor at Desjardins I look forward to meeting you and understanding your goals and needs.

As a professional in the field of insurance and investments, my understanding of people's goals and aspirations has created a lasting bond over two decades. The key to their success has been my passion for excellence.

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