Where There's a Will, There's a Way

Let's say you're off to the post office to mail a package to a loved one. Inside the box, protected by many layers of bubble wrap, is a precious family heirloom. The clerk turns the box over, puzzled, and points out that while you have jotted down your loved one's name on the outside, you haven't included an address. You shrug, pay for shipping within Canada, and explain that you're going to hope for the best.

Sound absurd? It is — but that's not far from the situation many Canadians are in. They haven't got around to creating a will, or they haven't updated their will in many years, so they haven't provided clear instructions on who gets what. They, too, are hoping for the best.


What happens without a will?

If you die intestate (without a will), your assets are distributed according to provincial laws that define who gets what — usually in order of family ties. It's a formulaic process that may be very different from what you wanted.

These laws on distribution of assets differ from province to province. Here are a few examples based on Ontario laws:

Beatrice and Jon are a married couple with two children in university. If Beatrice dies without a will, Jon will receive the first $200,000 from her estate plus one-third of the rest. The children will divide the remaining two-thirds between them. Giving money outright to her children may not be what Beatrice had in mind.

Helen and Andrew might fare even worse. They are a common-law couple with no children. If Helen dies without a will, Andrew won't be recognized as a "spouse" and Helen's parents will inherit her estate — unless they die before she does, in which case her brothers and sisters will share her estate equally. Her nieces and nephews come next in line, and then her other closest next of kin — but Andrew will receive nothing.

If you die without a will, you may also miss out on opportunities to reduce taxes and probate fees.* Probate fees alone can add up quickly. They also vary depending on the province you live in. In Ontario, they are known as the estate administration tax and they amount to $5 for every $1,000 (or part of $1,000) on the first $50,000 of the value of an estate, and $15 for every $1,000 (or part of $1,000) of the rest. Naming beneficiaries on registered accounts and insurance policies is one of the easiest ways to reduce the assets that are subject to probate. Your CIBC Financial Advisor can help with the appropriate beneficiary paperwork on your registered plans.

That's not all. A will also gives you a chance to assign two very important roles, executor and guardian, which would otherwise be court-appointed.


Role of the executor

An executor's role is to carry out your final wishes as you have expressed them in your will. Responsibilities include completing funeral arrangements, paying your debts out of the estate, preparing all required tax filings, applying to the courts for probate, managing your assets until they are distributed, and establishing and administering trusts set up in your will.

Your executor may face the challenges of arranging for the appraisal of artwork, jewellery, coins and antiques, keeping a business running, managing rental or commercial properties, selecting investments, and filling out complex tax forms. It can be a difficult, time-consuming job.

Choose your executor carefully. While many people appoint family members, ideally, you want someone with strong investment management and administrative skills who has the time necessary to do the work involved and who lives in the same province as you do.

In some cases a trusted friend or colleague may be more appropriate. If no one fits the bill or perhaps you need some professional help, or you have a complex estate, you may choose a co-executor such as a lawyer or trust company. A professional with experience executing estates can help to make sure everything goes smoothly.


Role of the guardian

It's a terrible thing to consider, but what if you can't be there to raise your children? You can name a guardian or guardians in your will to take care of your kids until they reach the age of majority.

Guardians make a permanent commitment to assume all the responsibilities of parents. They will make decisions about where to live, medical care, schooling and discipline. You can express your preferences, but the guardian is not legally obligated to follow them.

Guardians will also be financially responsible for your children's care — a potentially huge expense — which is why many people set up trusts in their will to provide funds for living costs, education, and other purposes.

It's important to note that naming guardians in your will doesn't guarantee that these people will raise your children. They are free to decline the role. And if they accept, they must apply to the courts for confirmation.

It goes without saying that being a guardian is a major responsibility, so choose people who share your child-rearing philosophy and discuss your expectations with them.


What do you need to create a will? This list will set you on the right path:

  • Personal information
    • Marriage contract/cohabitation agreement
    • Matrimonial regime (Quebec only)
    • Divorce/separation agreement
  • List of financial assets
    • Bank accounts
    • Investment accounts (including RRSPs, TFSAs, RESPs, non-registered accounts)
    • Pension plans/Annuities/RRIFs
    • Safety deposit box
  • Insurance policies
    • Individual
    • Group
  • List of other assets
    • Real estate ownership
    • Interest in a business/professional practice (shareholder or partnership agreements)
    • Other valuable items (jewellery, antiques, artwork, etc.)
  • List of debts
  • List of beneficiaries
    • Family
    • Friends
    • Charities
  • Name of executor(s)
  • Name of guardian(s) (if applicable)

Get peace of mind

Estate planning can be difficult to consider, let alone discuss, but it's a very important part of your financial plan. Best of all, once you've created or updated your will, you can be confident that you have done your best to provide for your family according to your wishes.