Take Care to Ensure Your Will is Properly Executed

The link below goes to an article from Megan Connolly, a Toronto lawyer with a specialty in wills and estates. In this article, Ms Connelly talks about a recent court case in which a will was held to be invalid because it wasn't properly signed and witnessed. This led to the assets of the estate being divided in a way that the deceased hadn't intended. Click on the link to read the article.

Take Care to Ensure Your Will is Properly Executed

Why it’s so important to have a will in Canada. Every province is different

The article at the link below describes - province by province - what happens if you die without a will. The article is from MuchMor Magazine, though I'm not sure who the author is. I certainly agree with the main idea of the article, which is that you need to have a solid will in place. Click on the link to read the article.

Why it’s so important to ensure you have a will in Canada. Every province is different

What happens when a tenant-in-common dies?

In this blog, I've mentioned a few times (and will mention many more times, I'm sure) what happens when a joint owner of property dies. However, I was recently asked what happens when a tenant-in-common dies.

A major difference between joint owners and tenants-in-common is that joint owners automatically have a right of survivorship to the entire property. Even though there are two or more joint owners, they are all considered owners of the entire property, as opposed to a half or a third. There are no halves or thirds with joint owners.

With tenants-in-common there ARE halves and thirds (and other portions). Each person owns only a portion of the property, according to the Transfer of Land document that was filed with the Land Titles Office when they acquired the property. There is no right of survivorship with tenants-in-common because each owner owns his or her section only.

It's possible for two people to be joint tenants of one portion of a tenancy-in-common.

When a tenant-in-common dies, his or her portion of the land is dealt with like any other asset that is in that person's name alone. Hopefully the person has a Will which sets out who will get his or her property. If not, there will be an administrator appointed by the court. Whoever is the beneficiary of the estate will become the new owner of the deceased's portion of the property. The portions of the property owned by the other tenants-in-common are not directly affected.

When deciding whether you want to own property as joint owners or tenants-in-common, or whether you want to own real estate together with other people at all, you really do have to think through the likely scenarios you might encounter. For example, if you own 1/3 of a house as a tenant-in-common and you want to sell your share, how do you get out of the arrangement? How do you sell 1/3 of a house? Are the other tenants-in-common in a position to buy you out?

If a new owner does join the tenancy-in-common because he or she has inherited someone's portion, how will the other owners interact with that person? Will they be able to agree on issues such as whether it should be sold, who should live in the house, etc?

There are pluses and minuses for different possible arrangements, and each comes with its own set of owner's rights. When I ask clients about their ownership arrangements, the vast majority say that they don't know whether they are joint owners or tenants-in-common. You should make sure that you thoroughly understand your own situation.

answering your question - adoption

Recently a reader left me a question which I haven't posted due to its length, but I still want to give the reader my comments on it. The gist of the question was whether a person's (let's say Frank) child who was legally adopted by another family, gets a share of Frank's estate should Frank die without a Will. Assuming that Frank died after the child was adopted by someone else, then no, the child would not get a share of Frank's estate. The child is considered the child of the adoptive family now and is entitled to a share of the adoptive parents' estates.

Can a beneficiary turn down an inheritance?

Recently I was asked this question at a seminar. Another audience member turned to the person asking the question and said, "why would you want to turn it down?" I think that is the reaction of most people, but there are certainly cases where a beneficiary would rather not receive the inheritance.

I was involved in a case where a woman died without making a Will. She had a husband and three adult children. Most of the assets of the marriage, including the family home, were in her name. Under the laws of intestacy (i.e. dying without a Will), her estate was going to be divided between her husband and her children. This would leave the husband in very reduced financial circumstances. The children believed that the estate should have gone to their father and did not want to inherit their shares.

It's unusual, but it happens.

Inheritances in Canada are not taxable, so accepting an inheritance won't cause you tax problems, even if you're already in a high tax bracket. However, accepting certain property might affect your finances. It could mean that you now to have to pay for maintenance and property tax on real estate, or pay insurance on valuable items.

It's also possible that a beneficiary might refuse an inheritance on purely emotional grounds. Dealing with the aftermath of the death of a loved one brings out strong emotions of every description.

If a beneficiary does not want to accept an inheritance, he or she can turn it down. It is a gift, not an obligation. It's referred to as waiving an inheritance.

To bring this about, the beneficiary would have to give the waiver in writing. There is no prescribed form of waiver in our Surrogate Rules of Court. In the cases that I've been involved in, I drafted a waiver form for the beneficiary to sign in front of a witness because I wanted the waiver to be clear and complete. I also wanted to make sure that beneficiaries were not being pressured by anyone to give up their inheritances.

The waiver form doesn't go to the court (unless there's some kind of dispute). The waiver is kept by the lawyer who acts for the estate/executor. Normally when someone waives a gift, the gift falls back into the residue of the estate and will then be paid or given to someone else in according to the Will, or according to the laws of intestacy. That is all arranged and fully documented by the estate lawyer before any money is paid out.

If my parents lend me money, do I have to repay it after they die?

Plenty of parents help out their children by lending money. Often it is for the down payment on a home, renovations or other major purchases. The amounts can be quite large. Sometimes the arrangement is formalized in a document, but most of the time it is not written down.

When the parent who has made a loan passes away, there is a question about whether or not the parent intended for the loan to be repaid. Often the child understands (or hopes, perhaps) that the money was a gift and the parent intended to forgive the loan all along.

But what happens if the parent makes a Will in which he or states that all of the children are to inherit equal shares? Does this mean that one child has received more than his or her share? And what if the parent died without making a Will at all? How should the loan be dealt with?

Let's look first at what happens if there is a Will. A parent can state in the Will whether or not he or she wants the loan to be forgiven. If the parent says in the Will that the children are to get equal shares of the estate but loans are to be forgiven, then the equal shares are calculated as if that loan had never been made.

If the parent says in the Will that the loan is not to be forgiven, then the child who received the money will receive less from the estate. It is rare that it actually involves the child repaying the loan. Unless the loan was larger than the share the child will inherit under the estate, it's simply a matter of subtracting the loan amount from the share. For example, if Sam was supposed to inherit $50,000 but had received a loan of $10,000 from his mother, and the mother's Will said the loan is not to be forgiven, then Sam will inherit only $40,000. This process is called set-off.

If a parent leaves a Will but doesn't say anything about loans to children, the executor must follow the general duty of collecting all debts owed to the deceased and his or her estate. This includes loans to children, so the child would have to repay it (or there would be set-off). This can be a real mess at times, for a couple of reasons. One is that if there is no documentation, the executor will have to prove the allegation that there was in fact money changing hands. This causes delays and usually friction between people as well. Another is determining the amount first loaned, and any amount repaid. The executor can't always count on co-operation from the child, for obvious reasons.

Now let's look at what happens if there is no Will and the parent has made a loan to a child. The Intestate Succession Act specifically states that in this case, any money given to a child is deemed by law to be a loan and not a gift. This would mean repayment or set-off. The same problems exist for establishing the amounts.

If you are a parent who has made a loan to one or more of your children, check your Will to see whether you've addressed the issue of repayment of loans. If not, do your children and your executor a big favour and deal with it so that nobody has to guess or litigate to figure out what you intended.

Does the government get my assets if I die without a Will?

This is another question that I am asked a lot, and which I'm glad to get the chance to discuss. As is often the case, the answer is "maybe".

If you die in Alberta without a Will, statutes called "The Intestate Succession Act" and "The Ultimate Heir Act" set out who will receive your assets (dying without a Will is known as "dying intestate"). Here are the basics:

If you are married or living in a common law relationship, your spouse gets the first $40,000 of the net assets. Notice that we are talking about net assets, meaning that taxes and expenses are paid first before the spouse.

If you are married/common law and have one child, everything above the first $40,000 is divided equally between the spouse and the child. The word "child" includes biological children (even if illegitimate) both minors and adults, and adopted children, but does not include step-children. If there is more than one child, the spouse gets the first $40,000 and one-third of the rest, and the remaining two-thirds is divided equally among the children.

If you don't have a spouse, your estate is divided among your biological and adopted children.

If you don't have a spouse or children, your estate will be divided equally between your father and mother, or to the survivor of them.

If you don't have a spouse, children or parents alive, your estate will be divided equally among your brothers and sisters. If any brother or sister died before you, the share that sibling would have received if alive will be divided among that sibling's children.

If you don't have any of the above people, your estate will be divided equally among your nieces and nephews.

If there is a need to go further to find beneficiaries, the Intestate Succession Act provides for that, stating that your next of kin will inherit.

If the person who is administering your estate can't find ANY next of kin whatsoever within two years of your death, the Ultimate Heir Act says that your assets will be paid to the government.

As you can see, it's possible that your estate could go to the government if you die without a Will, but only if nobody related to you by blood can be found. Even if you have no family, if you would prefer that your estate go to a charity or church rather than the government, you should make a Will to make sure your wishes are carried out.

If I die without a Will, my wife gets everything. Doesn't she?

Something I hear quite often from people is that they are not going to make a Will because they are married and they believe that everything they own will, because of the fact that they are married, go to their spouse when they pass away. Unfortunately, this is not necessarily the case.

Every province and territory in Canada has a law which says what happens to the property of someone who dies without a Will. In Alberta, it's the Intestate Succession Act. This law works together with other arrangements you've made, such as beneficiary designations (in insurance policies, RRSPs, pension plans etc) and joint titles (such as on your home or cottage). This combination of laws will decide who gets what from your estate when you pass away without a Will.

When you pass away, if you are married and everything you own is either in joint names with your spouse or designates your spouse as the beneficiary, then yes, your spouse will get everything you own. If you have any assets that are in your own name, then those assets are governed by the Intestate Succession Act.

The Act says that if you pass away leaving a spouse and one child (legitimate or otherwise, a minor or adult) then your spouse gets the first $40,000 of your assets and the rest is split evenly between your spouse and your child. If you leave a spouse and more than one child, the spouse gets the first $40,000 and one third of the rest. The other two thirds are divided equally among the children.

Note that this distribution includes children of previous relationships as they are your biological children. It also includes adult children with whom you might not have a relationship at all.

If you still have, for example, a life insurance policy that names your first spouse or your parents, that policy will still be paid to your named beneficiaries. If you own a cottage with your brother as joint tenants, the cottage will go to your brother and your spouse will not inherit any share of the cottage.

People are often surprised, and not always in a good way, when they realize how intestacy laws would apply to them and their families. It is a huge mistake to assume that you know how the law would apply to you when you have never asked a lawyer. If you have a family, you should have a Will properly prepared by a lawyer.