Death. Not the most uplifting topic but one that should be considered in any financial plan. Whether be inertia, or maybe not understanding the importance of having a Will, 51% of Canadians, don’t have one.
Below I discuss what happens if you don’t have a Will and some of the consequences and impacts to your loved ones:
What happens if you die without a Will?
When you die without a Will, it is called dying intestate and provincial laws govern. Here are some key details if you were to die without a Will:
There is no named executor: The courts will appoint an administrator for your estate. This may not be the person you wanted to be the executor and may fall on a person that may not have the ability or desire to administrator the estate.
Your assets will be frozen: Your assets are frozen and could take months for the newly appointed administrator to be appointed, apply for probate, and to access accounts. In the meantime, bills may go unpaid (including high interest credit cards), bank accounts go unmanaged, and could even result in the inability for loved ones to access your house or apartment.
Your estate will be distributed by provincial formula: The provincial estate laws provide for a distribution formula of assets that may not be your intended wishes. Did you know, that your spouse does NOT necessarily get everything you leave behind? For example, in Ontario, your spouse is entitled to a ‘Preferential Share’ with the remainder split between the spouse and surviving children (or their issue). This could be a nightmare situation, especially if the children are under the age of majority and the public trustee could be entrusted with managing their share. If you don’t have close family (spouse, kids, siblings, parents), you could find that a distant family member you don’t even know could inherit your assets.
Your children may not end up with your intended guardian: If both you and your spouse were to pass away without a Will, the courts would appoint a guardian. This may not be the wishes or in the best interests of the children from your perspective. In addition, the public guardian may administrator the funds that are left to the children until they reach the age of majority. The children would typically get the full value of the funds at the age of majority, which may not be in their best interests (as opposed to having a trust created in the Will to manage assets appropriately and outlining a phased distribution).
Other Consequences of not having a Will
Here are some additional consequences that may result:
Stress and fighting among family: There could be different claims on the estate, potentially from dependents, spouses/ex-spouses, common law partners, siblings, or other family members.
Your estate could pay (much) higher taxes: Without a Will and without estate planning strategies, the estate may have a higher tax burden, meaning less money for the beneficiaries. The court appointed administrator has to file your final taxes which may be much higher if beneficiaries were not named for registered accounts for example. There could also be extra probate fees payable.
Lengthy delays and extra costs: Without a Will, your estate could take months (or even years) to administrator which could leave your beneficiaries in a financial bind, especially if they are dependents. Extra costs could include legal fees to the estate or extra interest on unpaid credit card bills.
Assets may have to be sold: Not having a Will could result in assets being sold to satisfy the provincial distribution formula or to help pay debts or a heavy tax burden. This could include investments or even property.
Common-law partners may get nothing: Depending on the province, common law partners may end up with nothing. In Ontario for example, common law partners are not recognized for the purposes of intestate distribution (although a common-law partner could make a claim under the family act).
A properly crafted Will
It is extremely important to ensure you have a properly crafted and valid Will. It may cost between $250 and $2,000 for a Will (depending on where you get one or how complex it is) but it can ensure that those you love most are taken care of. Aside from dealing with the huge loss emotionally, your loved ones could be burdened with additional financial stress.
In addition to having a Will, see my article “A Love Letter to my Wife about Money” for some very personal thoughts to my wife about how to manage our family finances if something were to happen to me.