Intestacy? For those you love, make a Will

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.

Who pays the tax on mom’s RRIF at death?

Sibling stressors, legal rules, moral dilemmas

Some of the largest dollar value estate planning decisions we make are the naming of beneficiaries on registered plans.

With this in place, the plan proceeds will go directly to the named beneficiary/ies, rather than falling into the estate of the deceased. This bypasses exposure to estate creditors and probate tax, and reduces any delays obtaining the net funds if they had to pass through the estate.

But while making a beneficiary designation on a RRSP/RRIF may streamline both time and cost of distribution, the tax result could present an unexpected dilemma for the recipients.

Why is there tax on registered plans at death?

A registered retirement income fund (RRIF) is the payout form of what originated as a registered retirement savings plan (RRSP). Together they are legally-authorized income deferral arrangements. When a person dies, there is no more future deferral time, so the arrangement is generally terminated and the remaining balance taxed.

The main exception is a tax-deferred rollover to a spouse (or possibly to a dependent child), but otherwise the account value is brought into the deceased’s income in the terminal year.

Who is responsible for paying the tax?

Absent a rollover, and assuming for the moment no named beneficiary, a deceased’s RRSP or RRIF will be paid to the estate.

It is the executor’s job to deal with the deceased’s debts, with tax liabilities and creditors being top of the list. The registered plan proceeds are applied to those obligations, including paying the tax associated with the terminal income inclusion. After the tax obligation and creditors have been satisfied, the net remaining funds can then be distributed to estate beneficiaries along with other estate assets.

Does a beneficiary designation avoid income tax?

If the deceased had named a beneficiary on the plan, the gross proceeds would be paid in accordance with that designation. However, despite that no money flowed into the estate, the value of the RRSP or RRIF would still have been included in the deceased’s terminal year income, the tax on which remains the estate’s responsibility.

But who actually bears the tax?

If the estate has insufficient assets to pay tax, the Canada Revenue Agency (CRA) can force plan beneficiaries to pay a proportionate share of the deceased’s tax on the amount each received. Otherwise with a solvent estate, if the RRSP/RRIF beneficiary/ies and the residual estate beneficiary/ies are different, then the latter effectively bear the tax on the former’s RRSP/RRIF receipt. Notably, this Income Tax Act rule only applies to CRA; other estate creditors cannot pursue registered plan beneficiaries if there are insufficient estate assets to meet the deceased’s debts.

Is it the same for beneficiaries of registered pension plans?

When a named beneficiary of a registered pension plan (RPP) is entitled to a lump sum payment on death of the plan annuitant, the plan administrator withholds tax at source, and pays the net amount to the beneficiary. The administrator then issues a T4A slip to the beneficiary indicating the gross amount and the withheld tax, which the beneficiary then uses to report the income in the year of receipt. The withheld amount may be more or less than the actual tax due on the lump sum, which will either increase or reduce the recipient/beneficiary’s ultimate tax bill.

In sum, both the payment and tax liability land with the beneficiary on a lump sum RPP payment.

What did mom know, and what did she want? – Jeffrey’s dilemma

Jeffrey and his brother were named as beneficiaries of their mom’s RRIF, while they and their sister were the three estate beneficiaries. It was openly known that mom intended the brothers to get the RRIF, but it was unclear if she was aware of the tax rules.

While everyone got along fine, the sister could potentially have questioned mom’s knowledge and intention at the time of making the beneficiary designation. Whether that would be successful before a judge would depend on the facts and available evidence, but it would be certain to hurt family relations and cost money if they were to end up in court together.

The brothers, who were also the executors, looked into whether there was an accepted practice in such cases. Ultimately, it came down to a moral decision, and they decided that they two would bear the tax.

In all, it’s a reminder that even apparently simple decisions could have unexpected effects. While it’s impractical for you to have each RRSP or RRIF designation legally reviewed as made, the topic should be on the agenda next time you’re with your estate planning lawyer, to be sure all beneficiary designations properly reflect your intentions and expectations.

Baby bump – EI assistance for expecting parents

Informed use of employment insurance with a new child on the way

The decision to have children is as personal as it gets. But as impersonal as it may sound, one of the first considerations in deciding on a family expansion, is determining its impact on family finances. This means not just being ready to bear the cost, but also the potential reduced income.

At least at the start, the EI system offers some help to new parents.

Managing your expectations – Not full income replacement

Any way around it, you will be receiving less if you are not working. The general rule of EI is that is designed to replace 55% of your average weekly earnings, up to the maximum yearly insurable amount, which is presently $68,900 in 2026. That equates to a maximum of $729 per week, or less if your own income is less than that prescribed maximum. Either way, just like employment income itself, EI payments are taxable.

The general qualification requirement is that you need 600 hours of insurable employment in the 52 weeks preceding the claim. This criterion also applies to those applying for maternity and parental benefits (discussed below), in addition to showing that your regular weekly earnings from work have decreased by more than 40% for at least one week.

Types of benefits

Maternity benefits – For the expecting mother

This is for biological mothers, including surrogate mothers who are away from work due to pregnancy or a recent birth. It runs for up to 15 weeks, beginning as early as 12 weeks before the expected date, and may continue as far as 17 weeks after the due date or the date of birth, whichever is later.

As with general EI, it applies at a 55% benefit replacement rate, again up to the current prescribed dollar maximum (indexed annually) per week for the benefit period.

Parental benefits – Relief time that can be shared by two parents

Parental benefits are available to one or both parents of a newborn or newly adopted child. Both parents may be receiving benefits at the same time, or they may take them at different times. For a biological mother, application may be made for both the maternal benefit and parental benefit at the same time, allowing for seamless continuity from one benefit to the other.

Benefits may begin the week of the date of birth, or the week of placement in the case of an adoption. Benefits are available/measured in weeks, but do not have to be taken consecutively, allowing parents to start and stop according to their circumstances. There is a time limit by which all benefit weeks must be taken, based on either the standard option, or the extended option that pays less for a longer time:

- Standard parental option – All benefit weeks must be taken within 52 weeks (being 12 months)
- Extended parental option – Benefit weeks may be taken for as long as 78 weeks (being 18 months)

Once an option has been chosen and paid to either parent, the clock starts running on that time limit. As well, the option cannot be changed after payment begins, and the other parent must use that same option.

As between them, there is a maximum number of weeks any one parent may claim, being 35 for the standard option and 61 for the extended option. This condition accompanied the increase in the number of benefit weeks from 35 to 40 weeks and 61 to 69 weeks for the two benefit options respectively, as announced in the 2018 Federal Budget. The purpose of this condition/limit is to encourage more equitable sharing of parental responsibilities.

Further key details of both parental options and the maternity benefit are shown in the table on the following page.

Summary table by type of benefit
– For 2026

Personal savings strategies to get you to and through baby’s arrival

Inevitably a new child means new costs, though some lifestyle expenses may drop off as your time and attention are diverted. The net cost may be ambiguous, but most certainly your income will be less. The prudent course is to establish a savings routine early on:

1. As soon as you decide or become aware of your new addition, sit down together as parents-to-be and review your financial picture, ideally with the assistance of a financial advisor. While you may have managed without a budget in the past, parenthood will be extra difficult to navigate without good financial organization.
2. Inform yourself about the kind of products and services you may need during pregnancy and after birth/arrival. You can start by asking your own parents about their experiences, but be sure to update to the present. Beyond allowing for cost inflation over the intervening generation, educate yourself on current nutrition and healthcare practices, and safety devices (e.g. sleeping furniture, car seats), both legally-mandated and as recommended by recognized experts. Also, be cautiously skeptical about any gadget offerings you come across, some which may indeed save time and money, and others that may make you net worse-off for using them.
3. Arrive at a reasonable target for your planned weekly spending once baby arrives, and think carefully how long you will be away from work. On the income side, remember that the most you will receive from EI is just over half of your working income, and at a time when new expenses often crop up. Total up the potential weekly shortfall and multiply by the number of weeks you expect to be away from full-time work.
4. Divide the total shortfall above by the number of weeks from the present until you plan to begin your maternity/parental leave. That will tell you how much to save each week to accumulate exactly enough to carry you through the post-arrival time period. Don’t panic if this is a stretch. Rather, use it reinform your assumptions and intentions, and if necessary to motivate you to identify other savings sources to tap into.