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The Importance of Creating a Will Thumbnail

The Importance of Creating a Will

Approximately half of adult Canadians do not currently have a will.  This post will quickly touch on what happens when someone passes away without a will, and makes a case for getting one done.

The Will

A will is a document that specifies how your estate, including all property and assets, will be distributed after your death.  If you die without a will, a court will apply the laws of your province regarding the distribution of your assets.  This process can be time consuming, and the outcome may not reflect what you would have wanted.

Stuck in Court

When someone dies without a will, assets are divided using a formula that is laid out by the province.  In Ontario, assets for a person dying without a will are divided using the formula as follows:

  • a spouse only, the entire estate goes to the surviving spouse;
  • a spouse and one child, the first $200,000 (the “preferential” share) goes to the spouse; the remainder is split equally between the spouse and child;
  • a spouse and children, the first $200,000 goes to the spouse; the remainder is split one-third to the spouse, and two-thirds shared equally among the children.  
  • children, but no spouse, the children share equally;
  • no spouse or children, the estate goes to any surviving parent(s); if the parents are predeceased, the siblings share equally, with children of a deceased sibling sharing their parent’s share; if only nieces and nephews survive, they share equally;
  • no lawful heirs, the estate escheats to the Crown (becomes property of the province).

Accounts and property that have named beneficiaries (ie. RRSP's, TFSA's, RRIF's, and life insurance policies) would not be subject to the formula.  Same for jointly owned property with your spouse (ie. family home).  Nevertheless, the division of assets using this formula may not be remotely close to what the deceased would have wanted.  

Also consider that any funds that go to children get held in trust until the kids turn 18, at which point they get it all at once.  For parents with large estates, their 18 year old suddenly being given a large sum of money or property may not be something that they feel comfortable with. 

Bringing It Home

Will planning is uncomfortable.  But having a clearly laid out will can save those left behind considerable time, frustration, and pain.  It is common for estates with no will taking many months or even years to be settled.   And for families who have to deal with this process, it compounds the pain they are already going through having just lost a loved one.

A straightforward will and powers of attorney for property and health can be set up with a lawyer in about 2 hours and 2 visits, typically at a cost of between $500 - $1,500.  There are also online will kits that you can complete yourself for even cheaper.  My advice is, for something this important work with a legal professional.  For the peace of mind of knowing your wishes will be met after you're gone, it's a small price to pay. 

The information in this material is not intended as investment, tax, or legal advice.  Please consult your advisor or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.