The Benefits of a Will
A Will is a legal document that sets out your instructions concerning the distribution of your wealth upon your death, including the transfer of investments, real property (such as your house and cottage), shares in a private company, and other personal possessions (such as jewelry, cars, art, etc). In order for a Will to be effective, you must be of “sound mind” and the Will itself must be properly drafted and executed.
In the absence of a Will, or if the Will does not meet the appropriate legal standards, there will be an “intestacy”. In this case, the distribution of your estate will be governed by provincial law, which often will not reflect your intentions.
A Will only governs assets which you own at the time of your death. For example, property held in joint tenancy will pass directly to the joint tenant on your death and does not fall into your estate. As well, shares in a private corporation may be subject to a buy-sell agreement required them to be sold to the surviving business owners on your death. In this case, your Will can only direct who receives the cash proceeds from the sale of those shares.
Components of a Will
Testator: In the drafting of a Will, you are referred to as “testator”. As testator you will typically give instructions to your lawyer on how your estate is to be distributed and managed. In most situations you can also revoke or modify a Will prior to your death.
Executor: You will appoint an “executor” of the estate. This person makes sure that the Will is carried out in accordance with your wishes… In certain cases, it may be appropriate to appoint more than one executor. Duties of an executor include safeguarding the estate, paying your debts, and dividing your estate among the “beneficiaries” that you have named in your Will. Your executor should be someone that you trust and has the capabilities to take on this position. Choosing your executor should not be done lightly as the role is time consuming and comes with significant responsibility. It is also important to consult with this person before finalizing your Will to confirm they are agreeable to taking on this role.
Beneficiaries: As testator, you have wide powers to determine who will ultimately receive property from your estate – these people or organizations are referred to as the estate “beneficiaries”. You can appoint someone to only receive income (“income beneficiaries”) or only capital (”capital beneficiaries”) from your estate or to be both income and capital beneficiaries. You can also designate beneficiaries to receive a specific amount of cash or property, and/or they can receive what’s left over after all debts and specific gifts have been made (“the estate residue”). You also need to contemplate what happens to a bequest if a beneficiary passes away before
Beneficiaries who are Minors or Children with Special Needs: There are special considerations in making a Will if you have any minor children or children with special needs. This includes the appointment of a guardian and often times a trustee:
- Guardians: If you have any children under 18 years of age or any children with special needs, it is important to appoint a “guardian” in your Will. This guardian will take care of the minor or where the child requires special care. The most important consideration in appointing a guardian is the best interests of the child, and if the guardian does not meet this standard, a court will appoint someone who does.
- Trustees: A minor or person with an incapacity is typically not in a position to manage their inheritance and a provincially appointed Public Trustee will normally step in to manage these gifts on behalf of the child. In the case of minor beneficiaries, they will be entitled to their full inheritance upon reaching the age of majority. To provide additional protection it is often advisable to have a minor’s inheritance transferred to a trust which is administered by a trustee chosen by you. Generally, the trustee will be given the authority to determine how to manage the assets of the trust and how and when to distribute funds to the children. It is important to choose a responsible trustee to manage the trust on the child’s behalf.