Complications and costs of an un-planned estate

Recently, I was invited by a financial advisor to meet with a young mother of two whose husband had, in a matter of weeks, gone from diagnosis to death – and there was no Will. I’ve had that same meeting a half dozen times over my working life.

You may find it shocking for me to be so blunt in saying so, but that falls well short of the emotional pain of becoming a widowed parent of toddlers, trying to keep the household together financially, and plodding your way through an intestacy. It’s devastating enough to deal with a close death, without that added uncertainty, paperwork and excess stress.

So, to the question of when someone should have a Will, my unhesitant response is that if you ARE an adult then BE one – and make a Will. If not, here’s what may be ahead for your family.

Purpose of a Will, and effect of intestacy

A Will allows you to say who will receive what you own at the date of your death, in what proportions and with appropriate strings attached if you wish.

Without a Will, the provincial/territorial rules of intestacy – meaning the absence of a valid Will – will dictate who among your family (or more distant relations) will receive your property, and in what proportions. Unfortunately, that distribution would be without the benefit of your legally binding wishes, let alone any final thoughts or moral guidance you may have wanted to impart. The exact rules vary by jurisdiction, but generally:

• • Spouse and no children – Entire estate passes to the spouse
  • Spouse and child or children – Spouse commonly receives a legislated minimum amount, and the rest is distributed between the spouse and child/children, with the spouse getting the largest portion
  • Child or children – Each will get an equal share
  • No spouse or children – The rules expand outward to parents, siblings and other blood relations
  • No blood relations – The estate will likely end up with the provincial government

Note that intestacy does not supersede property passing by right of survivorship when held jointly (with anyone, not just a spouse), nor does it affect beneficiary designations on registered plans and insurance policies.

Extra stress for common law spouses

Depending on province/territory, a common law spouse may be excluded from estate distribution if there is no Will, or require a prior registered notice to qualify for a share of the estate. For the purposes of entitlement to intestate distribution, the term “spouse” applies to:

• • Only legally married persons in Ontario, Quebec, New Brunswick, Newfoundland & Labrador, and Yukon.
    (In Yukon, a common law spouse may apply for a court order for support and maintenance from the estate.)
  • Both legally married and common law spouses in British Columbia, Alberta, Saskatchewan, Manitoba, Prince Edward Island, Nova Scotia, Northwest Territories and Nunavut. (In Nova Scotia and Nunavut, registration of common law status and/or filing of a domestic contract may be required.)

Adjusting unintended or unexpected distributions

Even when people are legally married, an intestacy invariably puts the surviving spouse in a difficult position. Rather than the entire estate passing to the survivor (as is most often the expectation), the children may gain property rights alongside their parent. If the children are adults and all get along, that may be manageable. If there are minors and/or past conflict, then further complications and anguish may be ahead. The age of majority is 18 in six provinces: Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan. The age of majority is 19 in four provinces and the three territories: British Columbia, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, Nunavut, and Yukon.

Possibly, the spouse could take steps to force a different distribution, for example by electing under the jurisdiction’s family law to treat the death as a legal separation. Though this may be a practical and arithmetically justified step, it can be emotionally tough to come to this decision (in addition to possible social and cultural discomfort the survivor may feel), and even then it will seldom result in all the assets being back with the spouse.

And as challenging as things may be where the surviving spouse is the parent of the children in an intestacy, any conflicts of interest could elevate to conflicts in reality in second marriage and mixed family households.

Supporting your children in vulnerable circumstances

Beyond the matter of transferring property between you as spouses, as parents you also have to think the unthinkable of what happens if you both die, whether at once or in short succession.

Transferring property to children can be complicated. A trustee will be legally required for minors – which you could have done by Will, but which instead will probably require a court order in an intestacy – and even young adult children can use support and guidance. It requires careful thought to decide how best to structure a trust, what powers to give the trustee, how things will be accounted for, and ultimately who is best suited to the job. You missed out on your opportunity to give those instructions if you didn’t make out a Will.

Equally important, such a traumatic time is when children need a stable family structure. You want them to have an emotionally supportive home, surrounded by extended family and a social setting that allows them to build fulfilling lives. To the point, your Will is the last word you can offer on guardianship, so its contents and the conversations leading up to its execution are fundamental to your role as a parent.

Having ‘enough stuff’ is not the criterion

You may feel you don’t own enough to be bothered, but eventually you will (often without you noticing), and sometimes rights and claims arise as a result of an untimely or accidental death. And really, it’s not so much about the things you own, as it is about properly caring for the people you love, particularly those who are financially dependent on you.

Even if you’re young and penniless, think of the parents and the family from which you came. When a child dies first, it can be crushing to parents, whether that child is under their roof or has set out into the world. Such a ‘death out of order’ can be emotionally, socially and even physically paralyzing for parents. A minor child can’t do anything to provide relief in such tragedy, but as an adult you can make a Will to assure that the estate can be managed as efficiently as possible, helping your parents to begin dealing with their grief.