Wills

Do I need a Will?

A Will is virtually always a good idea. When we prepare Will for clients, we try to incorporate some estate planning into the process. In a “traditional” family model which includes two spouses, who have two kids together, as part of the planning process, you may consider holding title to property in joint tenancy with your spouse and naming designated beneficiaries on registered investments and life insurance policies. This process can often greatly simplify an estate when you pass, saving time and money on probate. The reason for this is that those assets pass outside the estate, avoiding probate fees. Sometimes virtually all of the assets pass outside the estate, and the Will may not even need to be probated, leaving some people to wonder if it was even necessary. However, despite the best efforts, sometimes assets are left in the estate that didn’t pass to a surviving joint tenant or designated beneficiary. This can be due to non-registered investments, a bank account you forgot about, or a new car that went into just one spouse’s name. Also, if there is a mutual accident, where both parties die within 5 days, the joint tenancy is severed and the respective shares forms part of each person’s estate. In these cases where there are assets in the estate that need to be probated before they can be distributed, if you don’t have a Will your estate will be subject to the intestacy rules under the Wills, Estates and Succession Act. These intestacy rules set out a formula providing for your next of kin. Some people worry the government will get it all without a Will, this is extremely rare. In some cases, the current scheme of intestate distribution isn’t much different than the way you intended it to pass, so it isn’t a concern. However, people often want to vary the allocation from that set out by the rules of intestacy, provide a specific gift to friends or family, specify trust terms for kids, set compensation for an executor, express funeral wishes, or name a guardian. This is why we recommend having a Will. If you have a blended family (ie. each spouse has children from previous relationships), the issues become even more complex and it is imperative to have a properly drafted Will.

[ Back to top ]

Can my Will be challenged if someone doesn’t like it?

There are provisions in the Wills, Estates and Succession Act whereby a spouse or child can challenge a Will if they don’t believe they are adequately provided for. This challenge is independent of need. The courts have determined you have a moral and equitable obligation to provide for your spouse and children. Accordingly, disinheriting a child, or dividing your residue unequally between your children, even if you are upset with them, is a risky proposition. Keep in mind, the court costs of challenging a Will typically are borne by the estate.

[ Back to top ]

My kids are not very responsible. Can I tie up their inheritance until they are 25, 30, 35+?

Sometimes inheriting a large sum of money at 19 isn’t the best option. However, if you try to tie it up until they are 25, but you don’t draft the terms carefully and include a “gift over” clause, then the child can typically collapse the trust at 19 and take the money without any strings attached. A “gift over” clause provides that if the child doesn’t reach the specified age (say 30), then the gift goes to someone else, thus preventing the court from collapsing the trust prematurely. There is also the rule against perpetuities to consider as well. You will want to consider whether the trustee can give any of the interest or principal to the child (by way of their parent or guardian) for their care, maintenance, education and/or well-being, before 19 years of age, and whether that formula changes after 19.

[ Back to top ]

I have a blended family; does this make a difference to my Will?

If you don’t address the blended family situation in your Will, you may find yourself rolling over in your grave. The issues in drafting Wills in a blended family situation can be complicated. Do you leave everything to your spouse so they can live in the style to which they are now accustomed, or do you divide it up amongst your current spouse and your natural children? Many people will just leave it to their spouse and then say after the last spouse dies, it is divided in some manner amongst all the children. However, if it is left at that, then it’s possible your children end up with nothing. This can happen unintentionally, for example they make a series of bad investment decisions, or they get ill and medical expenses eat into the estate. Or this can happen intentionally, for example when the surviving spouse waits out the limitation period for your children to challenge the Will (210 days from notice) and then modifies the Will leaving everything to just their kids. Either way, it’s a risk that can be reduced with proper drafting.

Options include:

1. Providing a gift to your children in the Will, to ensure they get something
2. Obtaining life insurance for your spouse or children where there isn’t enough to go around otherwise
3. Including a Mutual Wills clause, whereby both spouses agree that neither spouse will change their Will after the other passes. This creates a constructive trust claim, which while not perfect, is a relatively cheap band-aid type solution. Basically, the concept is that the spouse will take subject to a constructive trust claim so that if the spouse tries to change the will, the children should have a strong claim to challenge this. Also, many people ask, but what if my spouse later remarries, won’t this create problems as well? It can, but the new spouse can still make a claim for any change in value after they became common-law or married, so they won’t necessarily be left out in the cold.
4. Severing all joint tenancies (such as in the family home), converting them to tenants in common and then leaving only a life estate to your spouse, after which it passes to your children. This is much stronger than a Mutual Wills clause; however, it is still not perfect, and requires much drafting and expense. One issue to consider: what if your spouse wants to sell the house and move… to Kelowna, to Ontario, to Mexico?

[ Back to top ]

Should I consider a Mutual Wills agreement, even if I don’t have a blended family?

Some people do include a Mutual Wills agreement even if there isn’t a blended family. The concern being that the survivor remarries and the new spouse is a scoundrel. Realistically though, if it isn’t a blended family, the risk that your spouse would disinherit their own children is much lower. Also, if your spouse did disinherit their/your children, the children could challenge the Will. A step-child cannot challenge a Will.

[ Back to top ]

Should I add my child on title to my residence for estate planning purposes?
Having children on title to either your house or bank account is typically not the best idea. Since the Supreme Court of Canada decision in Pecore v. Pecore, and the companion case Madsen Estate v. Saylor, we have to be very cautious in having property in joint tenancy with mature adult children. Not only are there concerns over taxes (capital gains), loss of control, and potential judgment creditors registering charges against your child’s new interest, but the presumption now is in fact that it is not a true joint tenancy, but rather that the child holds the interest subject to a resulting trust for the parent’s estate. It may be possible to address some of these concerns with a gift letter pertaining to the right of survivorship, but this area of law is not clearly settled at the moment, so we are very cautious about doing this except in very limited circumstances and with additional documentation.

[ Back to top ]

Can I name 2 people to be co-executors of my Will?
We don’t recommend this. In the event of a disagreement, you would need to have a dispute mechanism clause, which can be complicated. We generally recommend that you pick 1 person to act, or if you feel there isn’t 1 person that could be fair to everyone, then you can pick 3 people to act, and in the event of a dispute the decision of the majority (2 out of 3) would prevail.

[ Back to top ]

Do I need to complete the Wills questionnaire?

I admit it may seem a little long and tedious; however it serves 3 important functions.

1. It’s a time saver which is how I keep costs down. Without having reviewed it prior to our meeting, questions such as: Have you considered alternate executors and beneficiaries? Do you know if you have a named beneficiary on your RRSPs? can lead to rescheduling while you consider options.
2. It helps with estate planning. With information about your property and bank accounts, we can discuss whether they should or should not be in joint tenancy. Also, we can determine whether you have named designated beneficiaries on your registered investments. Items that pass to a surviving joint tenancy, or by way of a designated beneficiary, bypass the estate, save time and money. Sometimes we are able to avoid probate altogether when one spouse dies, provided the necessary arrangements have been made in advance.
3. It is a useful tool for your executor when you pass; as it can act as a comprehensive list of your assets and liabilities, saving your executor time trying to determine where everything is.

[ Back to top ]

Can you update my old Will I had done somewhere else?
Unfortunately, we won’t “tweak” someone else’s Will, or do a codicil. Without having a questionnaire completed and going through our typical process, we can’t be sure we won’t be perpetuating someone else’s prior mistake. For example, “I leave the residue of my estate to my children, John and Jane.” While that may look “legal”, what if you don’t advise me that you also have a 3rd child “Sarah”? Similarly, what if doing a little estate planning, by way of adding your spouse on title to your residence, or naming them as a designated beneficiary on your RRSPs, you could save you thousands of dollars in probate and legal fees?

[ Back to top ]

Powers Of Attorney

Doesn’t my Power of Attorney cover health care?

Surprisingly some lawyers still get this wrong. The simple answer is No. Powers of Attorney only cover financial, legal and real estate matters; basically, everything other than health care.

[ Back to top ]

I already have the title to my house and bank accounts in joint tenancy, so do I need a Power of Attorney?
The joint tenancy will be useful if/when you pass, but until then, if you aren’t able to make decisions for yourself, then your spouse would need to apply to be your committee (expensive court application) if they need to sell, mortgage or otherwise deal with the title to the house.

[ Back to top ]

Do I need to name an alternate?
We think it’s a good idea to name a backup. In the case of a mutual accident (ie. if the first named person, typically your spouse, is in an accident with you and thus unable to act), having an alternate named saves someone having to make an expensive application in BC Supreme Court to be appointed committee (which has the equivalent powers). Not only is it expensive, you don’t have control over who is appointed. Also having an alternate covers you in case you forget to update your Power of Attorney and after 25 years, both you and your spouse are incapable of managing your affairs. While there are different ways to address these concerns (we’ve heard some lawyers who draw up multiple concurrent powers of attorney, other lawyers who just don’t address the issue), we don’t endorse these options, and instead recommend that you name the alternate in the Power of Attorney.

[ Back to top ]

How can I ensure that the alternate can only act once my primary is unable or unwilling?
This issue has been argued in court. It is best to clearly state that the alternate can only act when the first is either deceased (with a death certificate), declared incompetent (by a medical doctor) or the first name swears a declaration saying they won’t or can’t continue. Some forms provide that the alternate attorney can simply swear an affidavit saying the first person named is unable or unwilling, but we don’t recommend this as we see there being a greater risk for abuse (ie. the alternate swearing a false declaration).

[ Back to top ]

I only want the Power of Attorney to be effective once I become incompetent, can this be done?
Yes, it can, and this would be called a springing Power of Attorney. While good in concept, the practical reality can be slightly more complicated. Having a person declared incompetent can be devastating to some people, but furthermore, when someone’s mental health is deteriorating, it isn’t always black and white, some days are good, others not so much, so it can be a challenge for the doctors as well. Accordingly, we recommend that you choose someone you trust. As a precaution, just remember, if you don’t give them the original Power of Attorney, they can’t use it or abuse it. Sometimes it’s useful to either put it in a home safe or safety deposit box, where they can get access to only if necessary (talk to your bank), or leave it with a 3rd party you trust. It’s relatively rare you need the Power of Attorney on a moment’s notice, and there is typically time to arrange to retrieve it.

[ Back to top ]

Living Wills, Advance Medical Directives & Representation Agreements

What is a living Will?
A living will is not a legally binding document. It is an expression of intentions relating to end of life health care decisions, that may assist others (a temporary decision maker or representative) in making decisions. It doesn’t stand on it’s own as an advance medical directive is intended. The basic wording is along the lines that when the time comes, and there is no reasonable prospect of recovery and the end is imminent, then administer drugs to alleviate suffering, and basically “pull the plug”. As you can see, the wording is somewhat subjective and open to interpretation. Nevertheless, it provides some guidance. Also, many people believe having a living Will to alleviate the burden on the person left with the responsibility of making the hard decision, and giving them something they can show to other family members to explain their actions.

[ Back to top ]

What is an advance medical directive?
I really thought this was going to be a great tool when I first heard about it. However, doctors don’t talk to lawyers, lawyers don’t talk to doctors, so we are left with a document which is supposed to be a stand-alone, legally binding document instructing doctors what to do, but which no one can come up with clear “directives” to include. The most common precedents include the terms of a Living Will (ie. In a terminal situation, pull the plug). However, it was intended to cover far more than that. I suppose it is possible to include select wording from one of the five levels of intervention (typically provided when you move into a care facility), but the Law Society CLE precedents haven’t endorsed this. While a little better than a Living Will, it is more complex and costly to prepare, and because of the ambiguity of wording in a standard living will, if anyone disputes whether there really is no prospect of recovery, the doctor still seem to defer to the representative or temporary decision makers, so it doesn’t provide the protection some people intended. Accordingly, we don’t presently encourage this as a great option.

[ Back to top ]

Do I need a Representation Agreement?
Without a Representation Agreement, your temporary decision maker will make your health care decisions for you, if you are unable to communicate your wishes. Your temporary decision maker will be your spouse, and if they are unable or unavailable, then it will be your children. If you don’t want those people to make the decision, would rather your child than your new spouse, or if you have multiple children and think they may disagree, then a Representation Agreement is advisable. If you believe your spouse and/or children know your wishes and would make the right decision, then many people don’t bother with this. Admittedly, this is additional expense on top of the Will and Power of Attorney. Also, there are some restrictions on what a temporary decision maker can do, which may or may not be relevant to your particular circumstances.