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Estate Planning: Frequently Asked Questions

Question: What happens to my real and personal property in the instance that I die without having made a will?

Answer: The law regards a deceased person who did not leave a Will to have died “intestate.” A person who dies intestate will have their property distributed according to the intestacy and succession legislation of Ontario. The current governing legislation in this regard is the Succession Law Reform Act, which provides specific rules of inheritance which should be consulted and considered by any individual not intending to prepare a Last Will and Testament.

Question: What are the advantages of making a Will?

Answer: The advantages to making a Will are considerable. First, making a Will allows for one to distribute one’s estate exactly in the manner desired, that is distribution of estate assets to certain named individuals in specific shares or percentages. Second, a Will allows a unique opportunity to exercise creativity in devolving estate assets. For example, without a Will, one’s assets are distributed on a percentage basis to those individuals designated as beneficiaries pursuant to Ontario intestacy and succession legislation. Accordingly, one’s beneficiaries are preordained as are the respective beneficial interests of these beneficiaries. Such a distribution will therefore prevent specific bequests from being made as, for example, a specific gift of jewelry or art collection to certain family members or friends before dividing the residue of one’s estate amongst remaining beneficiaries. A third advantage is that one is able to name a person of choice – usually someone highly regarded for being trustworthy and responsible – as Estate Executor to administer one’s estate as opposed to having a Court appointed Administrator. Fourth, and related to the issue of choosing one’s Executor, is the advantage of avoiding the bond otherwise payable by one’s estate in administering on an intestacy basis. Fifth, there is great opportunity to set up trusts for minor beneficiaries together with designating a guardian for one’s minor children. Finally, the costs associated with administering an estate pursuant to the terms of a Last Will and Testament can be considerably less than administering an estate for which there is no Will and for which competing interests may lead to expensive litigation.

Question: Why should I hire the services of a lawyer in order to prepare my Will?

Answer: A Will prepared by someone other than a lawyer can be flawed in many ways. Consider the following typical pitfalls associated with Wills not drafted by a skilled solicitor:

1. Interpretation. Wills which are drafted using imprecise legal terminology are often times found to be ambiguous and ambiguity can lead to costly court applications and possibly even litigation amongst beneficiaries.

2. Contradictory. Wills not prepared by lawyers are often drafted carelessly so as to sometimes contradict, and thereby cause irreversible damage to, one’s estate plan. An example would be a clause in a Will which had the inadvertent effect of reversing a beneficiary designation previously made in a life insurance or RRSP policy.

3. Invalidity. Wills which are not prepared in accordance with legislatively mandated requirements will be invalidated and impossible to administer.

4. Costly. Wills prepared without the assistance and skill of lawyer will inevitably prove expensive to the estate and/or beneficiaries due to the inability for a lay person or a standard form Will kit to structure an estate plan which is tax efficient. A skillful lawyer possesses the expertise necessary to minimize the tax burden on one’s estate.

Question: How does divorce impact the terms of my Will?

Answer: Both divorce as well as marriage serve to revoke an already existing Will unless the Will specifically states that:

1. in the case of marriage, the Will is made in contemplation of the particular marriage; and

2. in the case of divorce, that an order for divorce shall not vitiate the Will.

Question: What taxes should I be concerned with when planning my estate?

Answer: At present, there are no succession taxes or taxes levied on gifts in Ontario.

Ontario estates are subject to Estate Administration Tax which currently is assessed as follows:

1. $5 of tax for every $1,000 of estate value for the first $50,000 of the overall estate; and

2. $15 of tax for every $1,000 of estate value over and above the first $50,000.

Ontario estates are also subject to capital gains and income tax, which said tax burden can be paid out of the estate or be passed on as a liability of the individual beneficiaries. Finally, all taxes can be deferred and even minimized by way of tax efficient estate planning involving the services of one’s lawyer, and when necessary, one’s accountant.

Disclaimer: This article provides general information only and is not intended, nor is it to be relied upon as a substitute to obtaining legal advice.

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