Willing and Able

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I have noticed it has been more common lately for increasingly younger people to have their wills and powers of attorney prepared, and I suspect this is , in part, due to the greater sophistication of consumers in general. I cannot emphasize the importance of an up-to -date will. For while dying without a will does not carry the dire consequences some would have you believe, the lack of guidance to family members and friends at a time of such emotional turmoil can be devastating.

A common misconception is that if a person dies without a will their estate somehow passes to the government. It does not.(Except in the case of a deceased with absolutely no living relatives) There are what are called the rules of intestacy which provide that certain people within certain parameters receive the estate of a person who dies without a will. For example, the spouse of such a person receives a “preferential share” amounting to the first $200,000.00 of the estate. He/she is also entitled to a proportional share in the balance of the estate, assuming there are children. However, this division my not be what the deceased wanted, and, moreover, it may create serious legal and practical problems in administering the estate depending on the size and composition of the estate.

When drawing a will, you choose who will handle your affairs when you are gone. The choice of an “Estate Trustee” (formerly an Executor) is extremely important. The Estate Trustee must be an individual who is trustworthy, organized and intelligent. The work of the trustee is onerous and sometimes complex. They must be able to work with accountants, bankers, investment advisors and yes, lawyers. It also helps if they are familiar with the estate as a whole, as well as the beneficiaries of the estate. Some people, particularly with large estates choose an institutional trustee such as a bank, brokerage or trust company. In any event, the trustee is entitled to compensation for their work, the amount of which is subject to review of the court.

If you have younger children you must consider the appointment of guardians for them in the event both you and your spouse die before they are old enough to conduct their own affairs. The guardians can be, but don’t necessarily have to be, the same people as the trustees. The roles are quite different, and a person with outstanding parenting skills may not possess the business acumen required of a trustee.

Within your will you can designate certain persons to receive monetary gifts. Examples of such beneficiaries include grandchildren, favourite neighbors, charities or other organizations. These “legacies” are paid out first by the Estate Trustee after debts and expenses are paid. As well, many people designate beneficiaries of personal items such as family heirlooms. (Eg. My mechanics tools to my daughter Mary; my Royal Doulton collection to my son Harry). These types of “bequests” can me made within the will or by reference in the will to a separate list or memorandum.

The very act of instructing and drawing a will involves a thorough review of your assets, liabilities and long term obligations. In many cases, personal planning tools can be set in place to minimize Income Tax consequences, Probate fees and legal costs. These include, in larger estates, the use of primary and secondary wills, (to be more thoroughly discussed in a future column), the establishment of holding companies ands family trusts. In more modest estates, assets may be placed in joint ownership with children, although this must be carefully structured in most cases. In some cases, gifts may be made of personal items and evidenced by documentation, while the item remains in the possession of the testator.

Whether we like it or not our lives are finite; the clearer the instructions we leave to our loved ones, the easier it will be for them to get through the difficult times.