Plan Your Will
5 steps to plan your will.
In planning your will, do the following:
- List your assets and liabilities;
- Choose your beneficiaries – those who will receive your estate;
- Choose your executors – those who will manage and distribute your estate;
- Make it clear and precise, so that you and your executors understand it; and
- Review it from time to time and when your circumstances change.
LIST YOUR ASSETS AND LIABILITIES
Make a list of your assets – your real estate, investments, pensions, savings plans, and life insurance.
Questions to ask yourself about your assets:
- Is the title to the real estate in your name, in your spouse’s name, or in both of your names?
- What are the approximate values of your assets?
- Who are the beneficiaries named in your life insurance policies and in your savings plans?
- Are your personal items, such as art or jewellery, of special value?
- Have you loaned money to people in your family?
- Have you already made substantial gifts to your children?
- Have you set up any trusts for your family?
- Do you expect to receive something when a relative dies?
- Do you have an interest in a private business? What are the arrangements for selling your interest when you retire or die?
Make a list of your Estate’s Debts and Liabilities: This includes things like mortgages, bank loans, and private loans. It also includes taxes. Immediately before your death, you are deemed to have disposed of all of your assets. The deemed disposition rule will trigger capital gains taxes and income tax on assets held on a tax-deferred basis.
Estimate your estate’s administrative costs: In most estates, it costs between 2% and 6% of the gross value to administer an estate. Include this as a debt of your estate.
By summarizing your assets and liabilities, and by deducting the administration costs, you can estimate the amount your beneficiaries will receive.
CHOOSE YOUR BENEFICIARIES
With few exceptions, you can leave your property to any person, organization, or charity you wish. You can treat your beneficiaries unequally and you are, generally, under no obligation to explain why. You can leave particular items outright (such as a house, cars, paintings, or bank accounts) to some. You can require your property to be sold and then leave the proceeds to your beneficiaries. You can delay a gift by setting up a trust, and the trustee will hold the property until an event of your choosing.
However, there may be claims on your estate. Your husband or wife may elect to receive a share under the Ontario Family Law Act. A dependant (for example, a child, parent, or common law spouse) may also be entitled to support from your estate. There may be other claims; for example, if someone has made substantial contributions to your property and was never compensated, they may have a claim to part of that property. You should speak to your lawyer and plan for these possibilities.
If you are married and have children, you and your spouse may draft Wills in which you leave everything to the survivor, and when the survivor dies, everything will go to your children. If you are widowed, you may choose to divide your estate among your children. If so, you may have the following questions: Should it be divided equally? If a child dies prematurely leaving one or more grandchildren, should the grandchildren receive the share that the deceased child would have received?
If you are not married, you may choose beneficiaries from among your family, friends, and charities.
CHOOSE YOUR ESTATE TRUSTEE(S)
You can choose to have one or more estate trustees (“executors”). You name your executors in your will, and that is where you provide them instructions on how you want them to manage and distribute your assets.
In most estates, the executors have a lot of responsibilities: They plan how to pay the debts and the taxes, how to have money for your dependants while the estate is being administered, how to set up the trusts, and how to distribute the estate. They file tax returns, keep accounts, look after the assets, make investments, and report to the beneficiaries.
Executors should be sensitive to the needs of your family. They should be able to do the job and to know when to get help and from whom. They should not, however, be expected to do the clerical work; they should be permitted – indeed encouraged – to have someone else do administrative work, such as keeping the accounts and doing the tax returns.
Often, a married person who leaves everything to his or her spouse (or to the children if the spouse does not survive the one making the Will) names the spouse as the sole executor, and also names someone else if the spouse does not survive – perhaps the children. Some people choose a professional trustee – a trust company – or authorize the estate trustees to hire a trust company to do the administrative work. Some people choose one or more persons and a trust company as co-trustees.
Be aware of naming an estate trustee who may have a conflict of interest – as a beneficiary, or as a possible purchaser of an estate asset, or for some other reason. If there is a possible conflict, you might not name that person, or you might name a co-trustee so that the person with the conflict will not have to act alone.
When you have a trust fund in the will, there will be two stages in the administration of your estate. First, the executors pay the debts and taxes, distribute the amounts to go outright to beneficiaries, and allocate assets to the particular trust funds. Second, the trustees administer those trust funds for as long as required. Often, the executors and the trustees of the particular funds are the same persons, but they need not be. You can have different trustees for different funds. For example, if you are going to have trust funds for your grandchildren, you can name the parents of your grandchildren as the trustees of their children’s trusts.
MAKE IT CLEAR AND PRECISE
Both you and your executors need to understand the will. Make it precise—what happens if your beneficiary dies before you? How long should a trust fund last? What things should a trustee consider in managing the fund? Who should look after your children?
Speak to a lawyer. In addition to helping you express your intentions on paper, your lawyer can give you advice about taxes, court fees, problems with the will, and difficulties with any trusts.
WHEN TO REVIEW YOUR WILL
- When you get married (marriage usually revokes a prior will), separated, or divorced;
- When you have children or when your children reach the age of majority;
- When an executor can no longer act;
- When you dispose of assets given away in your will; and
- When your assets or debts change substantially.