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Tuesday, June 5, 2012

Timing could be everything with wills

Recently a reader commented to me that he knew his father's will wasn't valid because his father had made the will leaving everything to his mother, but his mother had died before his father. The implication was that the father should have made a new will after her death. The reader in question was completely wrong about the effect of the timing, unfortunately, but it got me thinking about the various rules that apply to the timing of when wills are made.

Wills made by couples almost always allow for two scenarios, one scenario being that the spouse survives and the other being that the spouse does not survive. It typically can be summarized as "I leave everything to my spouse but if he/she dies before me, then everything to my children". Couples aren't the only ones who should have an alternate arrangement in the will; everyone should ask a few "what if he/she dies before me?" questions while planning their wills.

Assuming the reader's father had a will along these lines, it shouldn't matter to the validity of his will whether his wife outlived him or not. Many widowed people do choose to make new wills for many good reasons, but it isn't automatically required.

Timing also doesn't matter when it comes to the purchase of new assets (with an exception, which I'll get to in just a moment). If you make a will in 1999 in which you dispose of "all my assets", then your will covers the house you buy in 2005 and the investment account you set up in 2011. It doesn't matter that you obtain these assets after you make your will, and you don't automatically have to make a new will to deal with them.

The exception that I mentioned is any asset you buy that names a beneficiary. Usually this is a life insurance policy, but it could be an RRSP, RRIF or LIRA. With this kind of asset, the most recent designation is the one that is valid. So, say you  make that will in 1999 and you leave everything to your spouse. Then in 2005 you buy a new life insurance policy and on the policy contract itself you name your oldest son as the beneficiary. When you pass away, your will is valid, but not as far as your insurance policy. Because the beneficiary designation was made after the will, the designation holds.

If a person dies leaving more than one will behind, timing again becomes important. Only the most recent will is valid. Each new will revokes all earlier wills. This is automatic, with the exception of wills that are specifically set up to work with a second will (usually covering assets in another country, or separating personal from corporate assets).

Timing may also be an issue where a marriage is involved. In some jurisdictions, getting married automatically cancels your existing will, so you have to make a new one after you get married. In some jurisdictions, getting divorced changes (but doesn't cancel) your will, so you would likely want to make a new one after you get divorced.

As always, it's best to get one-on-one advice that is personalized to you so that you have the chance to set out all the facts that apply to you, and to ask plenty of questions.

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