The best estate plan in the history of the world

That's a pretty ambitious title - "the best estate plan in the history of the world". Whether or not you agree that the estate plan set up by its originator, James, is the world's best is really a matter of personal philosophy.  His plan involved leaving none of his millions of dollars to his four children, and leaving it all to charities except for $3. I'm attaching an article from the Farm and Ranch Guide, which tells James' story. Click here to read it and decide for yourself whether this is a good way to deal with your estate and your children (and to find out what the $3 was for).

7 reasons kids shouldn't be treated equally in your will

I found this article from www.businessinsider.com interesting because it talks about treating your children unequally in your will. Treating all the children strictly equally is so common in estate planning that many people think it's legally mandatory to do so. It isn't the law that all children be treated equally of course, and this article gives seven really good examples of when a parent might consider treating them unequally. Click here to read it.

I'd recommend this article to all parents. The advice in it is solid, and believe me the earth will not open up and swallow you if you consider leaving different amounts to your children in your will. Sometimes unequal actually means a more fair situation.

I'd also like to add an eighth reason to treat your children unequally. This one is specifically for business owners with a child who is going to follow you into the family business and one day take it over. You may be planning to leave an equal amount to all of your children, but consider this. If you own a business that is worth millions of dollars, and one of your children has already dedicated years to helping you build that business, is it really fair to leave that child only the same amount as the other children receive?

One child has actively contributed to the value of the business; the others have not. To me it's not unreasonable that the child who has helped increase the value for everyone through hard work and time invested should receive a larger share.

This article contains good food for thought.

How can I prevent step-grandchildren from inheriting?

The question of making sure that step-grandchildren don't inherit a portion of a grandparent's estate comes up more frequently than you might think. Occasionally a client will preface the question with a remark like "I don't want to sound mean, but...", which I think is totally unnecessary. It's your hard-earned money so why should you feel bad about deciding who gets it - and who doesn't - after you're gone?

Grandparents often, but of course not always, feel differently about step-grandchildren than they do about their child's biological and adopted children. They tell me they feel less of a connection with the step-grandchildren. Although they acknowledge the step-grandchildren as a part of their children's lives, they don't always think of them as a part of their own lives. Many explain this by saying "they aren't my own flesh and blood".

This sentiment is very relevant for a grandparent who is preparing a will. In a typical family, spouses leave their estates to each other, and when the spouse has deceased, the estate is divided among the children. This isn't necessarily the law, but it is by far the most common and expected arrangement.

So the grandparent makes a will leaving everything among his or her children. The lawyer will then ask what should happen if one of the children should die before the grandparent. The most common and traditional arrangement is that the deceased child's children (the grandchildren of the testator) will divide the deceased person's share. (Now you see why I draw so many diagrams and family trees in meetings with clients!)

This is the point at which the grandparent asks about the step-grandchildren. These days, blended families are more common than the traditional nuclear family, so the grandparent is absolutely right to clarify who is in the group of "the deceased child's children" and who is not. The idea is not to punish a step-grandchild in any way. The goal is to leave as much as possible to the grandparent's own blood relatives. The secondary goal is to make it clear to anyone reading the will exactly what the grandparent intended so that there are no arguments or misunderstandings.

The grandparent who wants to exclude step-grandchildren is aided by law. Much of the law of inheritance is based on the concept of bloodlines. Therefore, a child or grandchild who is not related by blood (or adopted) is not normally automatically included as a beneficiary. If you want to know exactly what the law says in your province or territory, you should sit down with an experienced estate lawyer in your area. That way you can obtain specific advice rather than general information.

Grandparents often like to solidify and clarify this default position by specifically including a clause that defines who is meant by the word "grandchild" in their wills. It's a simple matter of a few words to explain who is meant to be included and who is not, and it may save the grandparent's estate from being embroiled in a dispute.

This works the other way too, of course. If you, as a grandparent, want to make sure that your step-grandchildren are included in your estate, you should make sure that is specifically set out in your will.

How does adoption affect the right to inherit?

Many Wills express the testator's wish that his or her estate be shared among his or her children. In some families, it's obvious who is meant by the word "children", while in other families it is less so. In this post I'm going to look at the legal rights of adopted children when a parent - biological or adoptive - passes away.

As with all general rules about what is meant by certain legal words or phrases, remember that if the person's Will says something contrary to the general rule, the Will must be followed.

When an adoptive parent passes away, an adopted child has exactly the same legal status as a biological child born to that parent. When the Will makes a gift to "my children", adopted children will be treated the same as biological children when it comes to inheriting. Every province and territory in Canada has legislation in place that creates that right.

What if the biological parent of a child who has been adopted should pass away? If the biological parent leaves a Will that divides the estate among his or her children, this will not include the child who has been adopted by someone else. According to the law, the child is no longer that person's child, because of the adoption. If the biological parent wanted to leave something to a child who was adopted, he or she could do so by specifically mentioning that child's name in the Will.

It's important to note that when I say "adopted" children, I'm referring to children who have been legally adopted under provincial or territorial law. On occasion, a child will be raised in a family that treats the child as its own, but never formally adopts the child. The child might not know one or both of the biological parents, and may have a strong family bond with the new family. In a case like that, the child is not considered legally adopted. The child is still the child of its biological parents, not the parents who voluntarily raised him or her.

This sometimes creates interesting situations for blended families, and is one of the reasons I always urge the parents of blended families to spend some time with an estate-planning lawyer to make sure their Wills are going to create the outcome they want.

Top ten posts about Wills and Probate

I've prepared a list of the top ten posts on my blog (in terms of number of people reading them) and brought them all togther here in a list. There are a couple of really frequent questions covered in this list. Enjoy!

Click on the title to go to the article:

1. What do people in a second marriage have to consider when making a Will?

2. The avoiding probate at all costs issue.

3. Chart of probate fees across Canada.

4. Who can witness a Will?

5. Can I leave my child out of my Will?

6. Can I appoint my lawyer as my executor?

7. Can my executor also be a beneficiary?

8. Can a blind person sign a Will?

9. Do I have to leave anything to an illegitimate child I haven't seen in years?

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

Top ten posts about parents and children

The following are the top ten posts on my blog about parents and children. Loans, wills, treating them equally, protecting them - it's all here. These tend to be the topics that take the longest time to figure out when doing estate planning. Click on the titles below to go to the articles.

1. Do I have to leave anything to an illegitimate child I haven't seen in years?

2. Using trusts to protect your children.

3. Should my parents be my executors?

4. Is "fair" the same as "equal"?

5. Putting one child in charge of a trust for another child.

6. Can I leave my child out of my Will?

7. At what age should children inherit money?

8. If my parents lend me money do I have to repay it after they pass away?

9. What do the in-laws get?

10. Can I have my parents' house as part of my share of the estate?

Can I leave my child out of my Will?

When planning their Wills, parents usually put quite a bit of thought into what they want to leave to their children. Occasionally a parent doesn't want to leave anything to a particular child. There are plenty of good reasons for this. It could be because the parent and child are estranged. It could be because the parent gave the child quite a bit of financial help while the parent was alive. It could be because the parent really wants to leave it to someone else (either a person or a charity). Perhaps the parents have left an insurance policy or other property directly to that child.

Whether or not a parent would be successful in leaving a child out of the Will depends in large part on whether the child is either a minor, or an adult child who can't earn a living because of a handicap. Children who fall into those two categories are considered to be financial dependants of the parent and can't be left out of the Will without a significant risk that the Will would be contested.

Because adult children who are not handicapped do not have an automatic right to contest the parent's Will to get a larger share, the parent does not legally have to leave the child anything. This is an area where real life isn't as simple as the legal rules. A parent who leaves a child out of a Will is going against the expectations of the child and likely of everyone else. A child who is left out of the Will generally feels punished and wonders what he or she did to upset Mom or Dad.

Plenty of people think it's the law that they must leave their estates to their children and that they must treat all children equally in their Wills, but it isn't. It is, however, a strong cultural tradition that children inherit from parents, so if the parent plans to do something else with the estate, he or she is working against a very strong tradition and an even stronger expectation.

Whenever a client of mine wants to do something in a Will which may not seem logical or obvious to other people, I include a clause that briefly explains the person's reasons for taking this route. For example, if a parent were to leave a child out of the Will, the Will would contain a sentence or two giving the facts that the parent won't be around to give in person. It could say that the parties are estranged, or that the child has already been supported by joint property given to him or her. The purpose of including a clause like this is to make it clear to anyone reading the Will that the testator had put thought into the decision, knew that he or she had a child who expected to inherit, and that he or she made a different choice anyway.

Sometimes Wills are attacked on the basis that the testator (in this case the parent) didn't "know what he or she was doing". Having a rational explanation included goes a long way towards refuting that kind of claim.

If you are thinking of leaving one or more of your children out of your Will, please talk to an estate-planning lawyer about this. If you want to do this because of an ongoing problem between you and your child, also talk to the lawyer about how you will be able to protect yourself financially if you should lose mental capacity.