WILLS -The Basics
A will is a legal declaration of your wishes regarding the disposition of your assets after death.
As the person who creates the will, you are referred to as the testator (if you are male) or testatrix (if you are female). If your will says that your assets are to be given to certain individuals after your death, the gift is called a bequest, and the recipients are referred to as your beneficiaries.
In most cases, you can create a valid will at any time, provided you are of legal age (19 years old in B.C.) and you are of sound mind.
Purpose of a will
A will can do more than just dispose of your assets. A will serves several functions, such as:
Directing Who gets what and When
By writing a will, you control how your estate assets are disposed of after your death, with the exception of property held in joint tenancy or with a named beneficiary. You can name the intended beneficiary for each estate asset. If you feel it is prudent you can also place restrictions on the bequest by using your will to establish a testamentary trust to hold the assets on behalf of the beneficiary until some conditions of your choosing are met (e.g., until the beneficiary is 19 years of age).
Directing Who is in charge of your Estate
Writing a will also allows you to appoint a trusted individual or institution to act as your personal representative for your estate. Your personal representative (also sometimes referred to as your executor, executrix or trustee) will be responsible for carrying out the directions in your will to the best of their abilities.
When appointing a personal representative, you should choose a person you trust and who would be able to carry out her administrative duties while grieving your death. You should also name an alternate in case your first choice is unavailable or declines to serve. Unless you give them additional powers (such as investment powers), your personal representative must act in accordance with provincial trustee legislation.
Upon your death, a testamentary trust is automatically created to hold your estate, and your personal representative becomes trustee of your estate assets. They are responsible for managing your assets until they can distribute them in accordance with the instructions expressed in your will.
Recording Personal Wishes (Guardians/Funerals)
You can also use your will to make your personal wishes known, including naming guardians for your children, or providing instructions regarding your funeral. While these statements are not legally binding, the courts will normally follow these stated wishes unless there are reasonable grounds not to do so.
You may also want to include statements clarifying your bequests, such as why you felt it necessary to leave an heirloom piece to your closest friend, instead of your estranged daughter. These statements can help ensure that your will is not successfully contested.
Common provisions within a will
Your will can be as complex or simple as you choose to make it. However, remember that complex wills can be difficult and expensive to draft and administer, particularly if some of your instructions are contradictory or ambiguous.
This section highlights some of the provisions commonly included in a will.
In the opening pages of your will, you normally establish the following:
- clearly identifying you as the Testator/Testatrix;
- revoking any earlier wills;
- identifying your personal representative/executor (and an alternate) and indicating how you wish them to be compensated;
- instructing your personal representative to pay all debts; and
- clarifying any ambiguous terms or statements (definitions).
Disposition of Estate Assets
Next, you will deal with the disposition of your estate assets, which include all of your assets except those that already have a named beneficiary or that you hold in joint tenancy with someone else. Your bequests could be organized as follows:
- bequests of real property, including your principal residence, vacation properties or investment properties;
- bequests of specific articles, such as your treasured fly-rod collection or your golf clubs;
- bequests of domestic articles, including furniture, appliances, clothing and other personal effects;
- bequests of your financial assets (your bank account, your RRSP, your investment portfolio, etc.); and
- distribution of your estate residue, meaning everything that is left over after all of your debts have been paid and all of your specific bequests have been made.
You should note that recent changes to legislation have increased the incentives for charitable giving at death.
If you bequeath property to a beneficiary directly, that person will receive title to the property when your estate is distributed. However, you can also use your will to establish a testamentary trust to hold the property on behalf of your beneficiaries.
You can also choose to give a beneficiary a life interest in a piece of property, which entitles them to make use of the property as long as they are alive, with its final disposition controlled by the terms of your will.
Common Disaster Clause
If you are married, your will might simply state that all of your assets go to your spouse. In this case you would be wise to include a common disaster clause in your will. This would specify what should happen to your estate assets if you and your spouse die simultaneously, or even closely together (e.g., within 30 days).
If you do use a common disaster clause with a specific survivorship clause (e.g., within 30 days), you should be aware that distribution of your estate would be delayed until the survivorship period expires. If this is likely to cause hardship for your spouse, you should make some other provisions (such as a limited amount of insurance or a specific cash bequest without survivorship conditions) to tide your spouse over until the estate can be distributed.
Administrative and Investment Powers
Upon your death your entire estate becomes a testamentary trust (in addition to any specific trusts that you establish through your will), and your personal representative becomes trustee of your estate assets. Your personal representative’s actions will be restricted by provincial trustee legislation, unless you include provisions for expanded powers in your will.
While the provincial trustee legislation exists to protect your estate from careless mismanagement, the restrictions are not always in the best interests of your estate. In particular, the trustee legislation places severe restrictions on the types of investments that your trustee can make, even, in some provinces, excluding conservative mutual finds. This could limit the returns obtainable by your estate. Thus you may want to expand upon the powers granted to your trustee.
You might also want to address other administrative matters in this section, by including a provision that:
- specifies what should be done if your beneficiaries cannot be located;
- grants your trustee the power to borrow or lend money, or to renew or maintain your debt obligations such as your mortgage;
- grants your trustee the power to carry on your business or to incorporate your assets; and
- grants your trustee the power to settle claims against your estate, to sell real property, or to employ other agents.
Guardianship of Dependents
You can use your will to name a guardian for your minor or dependent children in to event of your death and the death of your spouse. This person will receive temporary custody of your children until she can apply for legal guardianship. While the court is not obliged to grant legal guardianship to the person you selected, it will generally honour your request, unless there is a valid reason not to do so.
You should also name an alternate guardian in your will. You may also want to include provisions for compensating the guardian, either wilt a direct bequest or through a. testamentary trust established for the benefit of your children.
Undoubtedly you will want to include something in your will that does not fit anywhere else. Most wills include a “miscellaneous” section for just this purpose. Some of the considerations that you might want to include in this section include:
- a declaration that your trustees will not be held liable for any losses caused by their actions, unless the loss is a result of their dishonesty or willful breach of trust;
- a provision allowing trustees to purchase your estate assets personally, if the assets are liquidated; and
- your rationale for specific bequests or exclusions.
Changing your Will
A will is a living document, an expression of your wishes from beyond the grave. As your life constantly changes, so will your assets and your desires. Therefore, you should review your will every few years and upon major life events, such as marriage or the birth of a child, to ensure that it continues to meet your needs.
You can make simple, straightforward changes to your will by preparing a codicil. A codicil is a document that modifies the terms of an original will without requiring you to redraft the entire will. You can physically attach the codicil to your original will to ensure that it does not become misplaced. If you are making significant changes you should consider drawing up a new will, being sure to destroy your outdated will at the same time.
To get started on planning your estate and creating your will, contact GBC Law.
Located in: Wills & Estates