How can I ensure my Will is valid?
There are three kinds of Wills, each with separate requirements to ensure validity:
- Holograph Will – written entirely in the hand of the Testator and signed by the Testator.
- Non-holograph Will – signed by the Testator and two witnesses, all of whom were present and observed the other witness and Testator sign the Will.
- Military Will – signed by a Testator who is a member of the Canadian Armed Forces (no witness required)
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 Wills and Succession Act (WSA) and the Estate Administration Act (EAA).
- Your Estate may be divided among people you would not otherwise name as beneficiaries in your Will.
- If there are no beneficiaries as determined by the WSA and EAA, 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.
- If the Testator separated, the spouse may have a claim against the Estate pursuant to the Matrimonial Property Act.
- If the Testator divorced, but the 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, appointment of the benefit to the spouse continues.
Am I required to leave part of my Estate to my spouse or children?
- You must meet the legal and moral obligations.
- Some of the legal obligations are detailed in the:
- Divorce Act,
- Matrimonial Property Act,
- Maintenance Order Act, and
- Family Law Act.
- The moral obligation requires you to consider what a judicious person would do in the circumstances, by reference to contemporary community standards. For example:
- Minor children,
- Physically or mentally disabled adult children,
- 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).
What is a Personal Directive?
- Personal Directives (“PD”) are also frequently referred to as “Living Wills” or “Advance Medical Directives”. Typically, this a document in which you name an Agent with authority to make decisions related to your personal and medical care, and in particular, the continuation or termination of medical care, when you are incapable of making or communicating that decision. Normally, you will discuss these decisions with your agent before you are in a situation where the PD 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.
- One of the primary benefits of executing a PD is that your spouse or family will avoid the inconvenience and expense of making an application in the Court of Queen’s Bench to appoint a Guardian on your behalf under the Adult Guardianship and Trusteeship Act.
- Three specific items to consider in a PD are:
- 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.
What is an Enduring Power of Attorney?
- An Enduring Power of Attorney (“EPA”) 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.
- Typically, two doctors must make an objective finding that you are no longer mentally competent before the EPA comes into effect. One of the primary benefits of executing an EPA is that your spouse or family will avoid the inconvenience and expense of making an application in the Court of Queen’s Bench to appoint a Trustee on your behalf under the Adult Guardianship and Trusteeship Act.
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 Queen’s Bench to appoint a Trustee or Guardian under the Adult Guardianship and Trusteeship Act.
- Reduces family conflict in decision-making.
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?
- 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. Be careful if you have assets in the United States – gifts over a specified value are taxed.
- If you own insurance policies, ensure you have specifically named beneficiaries. Do not refer to these policies in your Will – they will fall outside the Estate and be transferred to the named beneficiary(ies) allowing your Estate to avoid taxation in the terminal year.
- “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.
- Put your assets into a “Trust” whereby the income of the trust is distributed to your beneficiaries. This will preserve the principal assets of your Estate; however, Trust income is taxable, as are the payments received by the trust beneficiaries. You can also retain control over the management of the Trust after you die, by specifying the terms of the trust.
Is it necessary to obtain a Grant of Probate?
- Unless all property is held jointly, yes.
- If there is real property, 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 is cash or investments of more than nominal value, the financial institution holding those assets will typically require a Grant of Probate.
- As Executor, obtaining a Grant of Probate gives you the approval and authority of the Court to carry out your duties.
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 or Personal Directive is properly drafted and executed in accordance with the relevant legislation.
Kirk Montoute 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 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 the every attempt be made to resolve such disputes through mediation and/or arbitration.
Kirk Montoute LLP offers services in mediation, arbitration and litigation of Estate related disputes.