How can I ensure my Will is valid?
There are three kinds of Wills, each with separate requirements to ensure validity:
- Holographic Wills are written entirely in the hand of the Testator and signed at the bottom of the Will. Though Holographic Wills were quite common in the past, they are rarely used now.
- Military Wills are dated and signed at the bottom by the Testator. They need not be written in the hand of the Testator, nor witnessed. The Testator must be an active member of the Canadian Armed Forces
- Non-Holographic Wills are dated and signed at the bottom by the Testator and two witnesses, all of whom must be present and observe the Testator and the other witness sign the Will. Non-Holographic Wills are the most common form of Will.
What is the effect of a Will that is not valid or only partially valid?
- Your entire Estate or a portion of your Estate will be distributed according to the intestacy provisions of the Wills and Succession Act (Alberta).
- Your Estate may be divided among immediate or distant relatives (up to five degrees of consanguinity/relationship), potentially including those whom you would not otherwise name as beneficiaries in your Will.
- If there are no beneficiaries as determined by the Wills and Succession Act, your Estate will be transferred to the Provincial Government.
What happens if I get married, separated, or divorced after I execute a Will?
- Marriage does not void a Will, but a legal obligation arises to ensure that the spouse is adequately supported upon the death of the Testator.
- If the Testator is separated (from a married or common-law relationship), the surviving spouse may have a claim against the Estate pursuant to the Family Property Act or the Family Maintenance and Support provisions of the Wills and Succession Act.
- If the Testator divorced, but their prior Will was not changed to remove the former spouse or AIP as Executor or Beneficiary, and the parties have an Order or Agreement that finalizes their affairs, the former spouse is deemed to have pre-deceased the Testator.
- NB: If the Testator is deceased after separation but prior to divorce or execution of an Order or Agreement that finalizes their affairs, appointment the separated spouse as Executor continues as does any bequest to that separated spouse.
Am I required to leave part of my Estate to my spouse or children?
- You must meet your legal and moral obligations.
- The moral obligation requires you to consider what a judicious person would do in the circumstances, by reference to contemporary community standards.
- Some of the legal obligations are detailed in the:
- Divorce Act,
- Family Property Act,
- Maintenance Order Act, and
- Family Law Act.
- Individuals to whom a Testator has a legal obligation to make provision in their wills include:
- Spouse,
- Minor children,
- Minor grandchildren or great grandchildren to whom the Testator stood in the place of a parent
- adult children who are unable to earn a livelihood due to physically or mentally disability,
- in some cases, adult children who have been regularly supported by a deceased parent.
- If adequate provision is not made for property maintenance and support of a dependent, the Court may order adequate provision be made out of the deceased’s estates for proper support and maintenance.
- Application much be made within 6 months of the Grant of Probate (if the deceased was testate) or issuing a Grant of Administration (if the deceased was intestate).
Why should I update my Will?
- To ensure that the bequests are current.
- To ensure that the beneficiaries are current.
- To ensure that new assets do not fall into the residue of the Estate.
- To ensure your Estate is administered in a cost-efficient manner and maximizes the inheritance received by the beneficiary(ies).
Do I need to execute a completely new Will to update distribution of my Estate?
- No, you can execute a Codicil to your Will which lists any changes or additions to your Will.
- The Codicil must meet the same formal requirements as a holograph, military, or non-holograph Will.
- You can also incorporate a reference ti a Memorandum distributing minor items of personal property that can be updated from time to time (NB: This memorandum is morally but not legally binding).
How is my Estate taxed?
- Although Canada does not have “Estate Taxes” as such, your Estate is taxed under a “Terminal Return”, much like an Income Tax Return. All income, capital gains, RRSPs, etc., are considered income in the terminal year. This usually results in taxation at the highest tax rate, reducing the funds which would otherwise be distributed to your beneficiaries.
- NB: If you or your spouse are American citizens, or if you own property or assets in the United States, your Estate will be liable for significant American Estate taxes.
How can I minimize the tax liability of my Estate in Alberta?
There are a number of ways to limit your Estate’s tax liability by ensuring that your assets fall outside of your Estate and are not considered taxable under the terminal return. Several strategies include:
- Make inter vivos gifts; that is, distribute your assets through gifts while you are still alive. Seek advice from your accountant before doing so, as this may result in a deemed capital gain and tax liability. If you have assets in the United States, be especially careful and seek the advice of a lawyer or accountant who is familiar with the IRS.
- “Freeze” your Estate under s. 85 of the Income Tax Act. The effect of an Estate freeze is to delay payment of tax on the capital gain that accrues subsequent to the Estate freeze until it is taxed through your children/beneficiaries’ Estates.
- If you have a disabled dependent, you may put some of your assets into a Qualified Disability Trust, whereby the income of the trust is distributed to a disabled beneficiary and given preferential tax treatment.
- If you have assets that carry a latent capital gain liability, may you may put some of your assets into a Spouse Trust, which gives your spouse the use of income from the trust but delays triggering the capital gain liability until those assets are disposed of by your spouse or upon your spouse’s death.
Is it necessary to obtain a Grant of Probate in Alberta?
- Unless all property is held jointly with your spouse or others, yes.
- If you own real property in your own name or as a Tenant-In-Common, the Land Titles Office will require a Grant of Probate to transmit the property to the Executor (Personal Representative), and then to the Beneficiaries.
- If there are investments or cash of more than nominal value, the financial institution holding those assets will typically require a Grant of Probate before releasing those funds.
- As Executor, obtaining a Grant of Probate gives you the approval and authority of the Court to carry out your duties.
What is a Personal Directive?
- Personal Directives is a document in which you name an Agent with authority to make decisions related to your personal and medical care, and other legal decisions of a non-financial nature.
- Personal Directives are also frequently referred to as “Living Wills”, “Advance Medical Directives” and “Powers of Attorney – Personal”.
- Your Agent under Personal Directive will make decisions with respect to the continuation or termination of medical care, when you are incapable of or have lost capacity to make or communicate your decisions. Normally, you will discuss these decisions with your Agent before you are in a situation where the Personal Directive comes into effect.
- In Alberta, the Personal Directives Act describes how a PD is to be prepared and what may or may not be contained in a PD.
- To ensure your Agent has the broadest scope of authority, ensure the following items are specifically referred to in your Personal Directive:Participation in psychosurgery as defined in the Mental Health Act, RSA 2000, c. M-13, as amended;
- Removal of tissue for implantation in the body of another living person (including your agents, etc.) or for medical education or research purposes;
- Participation in research or experimental activities even if the participation offers little or no potential benefit to you.
- One of the primary benefits of executing a Personal Directive is that your spouse or family will avoid the inconvenience and significant expense of making an application in the Court of King’s Bench to appoint a Guardian on your behalf under the Adult Guardianship and Trusteeship Act.
- Typically, a Capacity Assessor must make an objective finding that you are no longer mentally competent before the Personal Directive comes into effect. One of the primary benefits of executing a Personal Directive is that your spouse or family will avoid the inconvenience and significant expense of making an application in the Court of King’s Bench to appoint a Guardian on your behalf under the Adult Guardianship and Trusteeship Act.
- Appointing an Agent under a Personal Directive also reduces family conflict in decision-making.
What is an Enduring Power of Attorney?
- An Enduring Power of Attorney is a document in which you name a trusted person to act for you and make decisions with regard to your finances and property in the event that you lose your ability to make competent decisions at some time in the future.
- The significance of an “Enduring” Power of Attorney is that it endures (continues) notwithstanding any subsequent loss of capacity.
- Typically, a Capacity Assessor must make an objective finding that you are no longer mentally competent before the Enduring Power of Attorney comes into effect. One of the primary benefits of executing an Enduring Power of Attorney is that your spouse or family will avoid the inconvenience and significant expense of making an application in the Court of King’s Bench to appoint a Trustee on your behalf under the Adult Guardianship and Trusteeship Act.
- Your Attorney under the Enduring Power of Attorney has authority to deal with assets, real property, investments (Banks, Land Titles Office, Government agencies).
- Your Attorney is under an obligation to act with “utmost good faith” in protecting your interests, and to give an accounting of actions taken while acting as your Attorney.
- If an Attorney acts inappropriately, they can be removed by a Court Order and directed to reimburse any funds misused or squandered.
- Appointing an Attorney under an Enduring Power of Attorney also reduces family conflict in decision-making.
- If you want your Attorney to have the ability make cash gifts to you or your family members, or to assist your children with their education or other expenses, you should state this in the Power of Attorney.
What are the benefits of Personal Directives and Enduring Powers of Attorney?
- Authority to deal with assets, real property, investments (Banks, Land Titles Office, Government agencies).
- Authority to make decisions with respect to medical and personal care (Hospitals, retirement or extended care facilities).
- Spouse or family will avoid the inconvenience, time and expense of making an application in the Court of King’s Bench to appoint a Trustee or Guardian under the Adult Guardianship and Trusteeship Act.
- Reduces family conflict in decision-making.
Do I need a lawyer to prepare documents related to my Estate?
- No, but it is recommended that you use a lawyer to ensure that the Will, Enduring Power of Attorney and Personal Directive are properly drafted and executed in accordance with the relevant legislation.
- Kirk Montoute Dawson LLP offers comprehensive Estate planning and Estate administration services.
How can I resolve disputes arising from the administration of an Estate?
- Hopefully, such disputes will be avoided by thoughtful advance planning. In the event a dispute does arise, any interested party can apply for a remedy from the Surrogate Court. Such applications are typically costly, time consuming and result in permanent damage to family relationships.
- It is recommended that every attempt be made to resolve such disputes through mediation and/or arbitration rather than litigation in the Surrogate Court.
- If it is necessary to initiate or respond to a claim in the Surrogate Court, consider requesting an Early Intervention Case Conference with a Justice of the Surrogate Court, to expedite resolution and explore alternate forms of dispute resolution.
- Kirk Montoute Dawson LLP offers services in mediation, arbitration and litigation of Estate related disputes.