What you need to know about Estate Planning

The will

A will, sometimes called a legal will, is a document that sets out what happens to your assets and who looks after your children if you pass on. The main purpose of a Will is to determine who should receive gifts from the estate (the collection of property and assets after debts are paid). It can also give burial (or cremation) instructions and can appoint a guardian for minor children.

The person making the will is called the testator, the person(s) looking after the testator’s estate is called the personal representative(s) (the new term for executor), and the people who receive gifts (inheritance) from the estate are called beneficiaries.

Where someone dies without a will, this is called an intestacy. There is statute law that sets out what is to happen in these cases, including who can apply to be appointed as the personal representative and who the beneficiaries will be.


Codicils

A codicil is a special document that amends an existing will. It can be used to change any part of the will by adding to, removing, or revising it. If you have an existing will and wish to make a few changes, a codicil is usually sufficient, though if you want to make more substantial changes it may be advisable to have a new will drafted.

GUARDIANSHIP

If you are a parent with children under the age of 18, a will is the best and most efficient way for you to determine who will be responsible for your children if you pass on. In Alberta, wills can indicate your choice of guardian (or guardians) for the children. The guardian is automatically appointed upon your passing without the need for a court order or other formalities. This person or people are responsible for where your children live, their education, their activities, and their healthcare. A will can also be structured so that the guardian will be allowed to access estate funds in order to look after your children.


GIFTS TO BENEFICIARIES

People often have difficulty deciding how to divide their assets, and may overthink this part of the will. The process does not need to be complicated. Most wills are “simple” wills, meaning they have a simple and efficient structure for gifting assets or dividing the estate. If you are in a relatively uncomplicated family situation and your assets are located in Alberta, chances are that a simple will can work for you.

There are 2 types of gifts in a will: specific gifts, which give a set amount of money or a specific item or property to a beneficiary, or residual gifts, which are proportional gifts of the residue (all the capital in the estate after all expenses have been paid and all specific gifts paid out). A simple will only contains residual gifts.

Typically, if you are married, your first choice of residual beneficiary is your spouse. If you have children who are not from this relationship, you should consider some other division of the residue. There are many factors that a person must consider when determining who should inherit from their estate, so it is always advisable to receive advice from a professional.


PowerS of Attorney and Personal DirectiveS

A Power of Attorney and Personal Directive are often considered your “living Will”, meaning that they take effect while you are still alive, if you lose mental capacity. These are separate documents and, due to their importance, they are included as standard in all of our “complete” estate plans.

The Power of Attorney appoints a person, the attorney, to look after your finances. They can pay your bills, maintain your home and invest money on your behalf. The term “attorney” does not refer to a lawyer: in Canada it means someone who you appoint to look after your financial affairs. You can appoint anyone as your attorney as long as they are the age of majority and of sound mind.

The Personal Directive appoints an agent to look after your person, allowing them to decide where you reside, what activities you take part in and the healthcare you receive. The Personal Directive also sets out your end of life instructions, which tells the agent whether or not you want to be kept alive by artificial means or for pain medication to be administered.

The risk of not having a professional estate plan

Given the high costs typically charged by lawyers, many people choose not to complete an estate plan, they try to do it themselves, or they hire a paralegal service. There are many problems that can arise if you don’t have a professionally completed estate plan.

If you pass on without a will, someone must make an application to the court to be appointed as your personal representative, and, if you have children under the age of 18, someone will have to apply to be appointed as their guardian. You will have no control over how your assets will be distributed or who will be named guardian.

If you have a will that was not completed by an experienced professional, there are substantial risks, including

  • Total Invalidity of the Will: there are special requirements governing the execution of the will by the testator and witnesses that must be met for a will to be valid. If these requirements are not met a will is considered invalid and all provisions in the will would be void. The personal representative would have to apply for a Grant of Administration (as if the will doesn’t exist) or make a special application to a judge to validate the will, which usually requires a lawyer and extra legal fees.

  • Invalidity of the Personal Representative: there are laws that dictate who can be a Personal Representative on an estate. If the appointment of a Personal Representative is invalid, a court application would be needed to name a new Personal Representative. Also, if a Personal Representative dies in the midst of acting for an estate, the will may not properly appoint an alternate, leaving the estate without a Personal Representative. Again, further court action would be required.

  • Invalidity of Gifts: even if a will is valid, there may be individual gifts that may still be considered invalid. There are special requirements for gifts that must be met. If they are not, then a gift may be considered void. This can create disputes between beneficiaries, even leading to court action. Also, if you wanted to prevent someone from receiving a gift from your estate, the exclusion may not be valid.

  • Lacking crucial documents for Probating the Will: at the time the will is signed, there should be an affidavit completed by a witness attesting to the testator’s signature before a lawyer, commissioner for oaths or notary. If this document is not completed at the time the will is signed, it may be difficult or time consuming to find the witnesses. 

Here are some examples of what can go wrong when you proceed without professional help:

  • Peter purchases a legal will kit at a registry and completes the forms with his friend Tina as a witness. After he is done, Peter goes alone to see his friend Jessica to sign as the second witness. The will is invalid as Jessica did not sign the will at the same time as Peter and Tina. The personal representative will now have to hire a lawyer to make a court application to validate the will.

  • Pam has a son, Ted, who is estranged from the family, and a son, Jim, who has been caring for her for many years. She uses an online web-based service to create a will. In her will she gifts $1.00 to Ted and her house to Jim. The will does not mention a gift of the residue. Some time later the house is sold and the proceeds are deposited into Pam’s bank account. Pam dies without buying a new house. Since the will did not include a gift of the residue the law dictates that the residue of her estate, including all the money from the sale of the house, is divided 50/50 between Ted and Jim. If she had met with a lawyer they could have advised Pam on how to ensure that Ted was completely removed from her estate.

  • Chris has his friend Ivan, an accountant, help him make a will. Ivan is not a commissioner for oaths or notary public, so he is not able to complete the affidavit of a witness. The will is signed by Chris and witnessed by Ivan and one of Ivan’s employees. Years later Chris dies and his personal representatives retrieve his will, but Ivan has retired and they cannot locate him or his employee. The personal representatives waste time and money trying to track Ivan down to sign the affidavit.

  • Jake and Cynthia are husband and wife. Jake has a child, Greg, from another marriage. Jake and Cynthia hire a paralegal will service that uses a cookie-cutter simple will. Jake’s will is set up so that if Jake dies first, all of his estate goes to Cynthia, and if Cynthia dies before him, when he dies all of his estate will go to Greg. Jake dies before Cynthia. Cynthia later remarries and changes her will and does not include Greg. Greg receives nothing from his dad’s estate. If Jake had known the risk he would have made sure Greg received a gift when Jake dies, regardless of whether Cynthia is still alive.

Without professional guidance, a self-completed or non-professionally completed will may cause legal problems for the personal representative and the estate. There are many instances where people tried to save money by making their own will or had their will completed by a non-professional, only for the estate to have to pay increased legal fees to fix the problems with the will.

If you have more questions, or are interested in our services,

call us at 1-587-200-4866, email us at firm@totalestate.ca, or visit Our Services