The importance of leaving a will

In this article from www.estatedebate.com, Toronto lawyer Ian Hull says that many  people don't have wills either because they are making excuses why they haven't gotten around to it, or they are making false assumptions that they don't need one. Which are you? Click here to read the article.

Will and estates myth-busting

From time to time people say things to me that reveal just how many myths and misunderstandings exist regarding wills. It's not really surprising; misinformation is passed on as frequently as real information and is often more interesting. TV and books fictionalize and sensationalize legal situations. And the internet is quite the culprit too, in the sense that pretty much anyone can start a blog, say they're an expert and talk about anything they like.

I thought I'd take a few minutes and "bust" five of the misconceptions that have crossed my path recently.

1.   Myth # 1: Legal documents such as wills can't be photocopied. Sure they can. In fact after someone passes away, his or her will is often photocopied dozens of times so that copies can be given to the beneficiaries, the lawyer, the bank and the land titles registry. Perhaps the grain of truth that led to this myth is the fact that in order to probate a will, the executor must have the original document. So this myth is not so much busted as adjusted; you can't use a photocopy to get probate (except in special circumstances) but you can use a photocopy for every other purpose.

2.  Myth #2: If a will is in a sealed envelope in a safe deposit box, breaking the seal will invalidate the will. Now this doesn't make sense to me at all. If the will is automatically invalidated by opening the envelope, how is the will ever going to be used? Though this does sound like a great scare tactic for keeping nosy people out.

3.  Myth #3: If a husband and wife make wills at the same time and one spouse dies, the other one's will is invalid. Perhaps this myth grew out of the old practice of a husband and wife having only one will document between them, a practice that petered out long before I started doing wills 26 years ago. In any event, it simply isn't true. Each person does his or her own will and each document stands independently of the other. Wills should be set up so that they will work properly regardless of which spouse passes away first, or even if they pass away in a common accident.

4.  Myth #4: There must be a reading of a will after someone dies. Beneficiaries frequently tell me that they think the executor is hiding something because there has been no reading of the will. This was never the law, though it was once a custom, particularly among wealthy families. It's a custom that lives on in novels and movies, though not so much in real life. These days a beneficiary is most likely to receive notice of his or her inheritance by way of a registered letter. Those who are not beneficiaries are simply not involved.

5.  Myth #5: All family members are automatically entitled to see another family member's will. Nope. Wills are private documents, even after the person has passed away. The question I hear more than any other is "how do I get a copy of my mother/father/sibling's will?" Sorry, but if you're not a residuary beneficiary of the will, you don't get a copy and you're not entitled to see it. I'm well aware that this isn't the answer people want, but it's something they will have to live with. This is a general rule of course, and an exception is a person who is not named in the will but who is automatically entitled to support from the will because they're a legal dependent (i.e. spouse, minor child, handicapped adult child) entitled to support under the will. Other court actions sometimes result in a person getting a copy of the will, too.

I hope this brief myth-busting session will enlighten readers a little bit about some of their concerns. I also hope it will encourage executors and beneficiaries alike to keep asking questions, keep seeking out professional help with wills and estates, and to stay as informed as possible.

They're joint owners but his will gives away their joint assets

Recently a regular reader of this blog wrote to me with a question that illustrates that a will is only going to work properly for you if it fits in with both the law and your circumstances. Here are his question and my answer:

"A friend of mine told me a few years ago he and his wife made their wills. In their home and bank accounts they are joint tenants. He went to his lawyer and changed his will and he said his half of the house and his half of the money goes to his two sons after his death and not to his wife. My question to you is what kind of a will is that?"

The short answer to this question is that it's a will that's only going to work if the husband outlives the wife.

In your will, you can only give away what you own at the time you pass away. Though in life this fellow owns a house and a bank account, on death (assuming he is still married) those things will automatically belong to his wife because of the law of joint tenancy. Therefore the will is trying to give away assets that it can't give away.

If the wife passes away first, the will is fine because the husband will have full ownership of the assets on his wife's passing.

I can think of a few scenarios in which a lawyer might draw up a will like this for someone (and I'm just assuming that the lawyer advised the husband about the law of joint tenancy because that is, after all, the lawyer's job). One possibility is that the husband told the lawyer that he and his wife are planning to split the property between them while they're alive so that they are no longer held jointly. Another is that the husband and wife are planning to get divorced and split up their property.

And the third possibility is that the husband mistakenly believed that if he didn't tell the lawyer that assets are jointly owned, nobody would know and he'd get away with it. You'd be amazed at how often clients don't tell the lawyer the whole story because they don't fully understand how legal ownership works. Unfortunately they pay for it big time later on because the document they pay for is not the document they really need.

The worst case scenario for a will like this is that the sons will try to uphold the will, as they will understand it to contain their father's last wishes. This means a lawsuit of course, in which the very assets they are fighting about are being depleted by legal fees, court fees and accounting fees.

Nothing good is going to happen when a person's will does not work together with that person's bigger picture of joint property, beneficiary designation, insurance and family situation.

The basic estate planning documents that everybody needs

The term "estate planning" sometimes makes people think of millionaires who live behind wrought iron gates with a butler at the door. But all it really means is that you've put plans in place to deal with your eventual passing and for the possibility of losing your mental capacity. Estate planning isn't just for the wealthy. Everyone with a family needs to think about estate planning.

Most people know they need a will, even though a good half of Canadian adults don't have one. Even with a valid will in place, you haven't fully prepared yourself to protect your family and your assets. Your will does nothing to help you or your loved ones if you are alive but unable to make decisions due to dementia, illness or injury.

Here are the basic documents that everybody should have:

1.  A valid will that is kept up to date to reflect changes in your life. The will should be prepared as part of a bigger estate planning picture that takes into consideration your joint property, your designated beneficiaries on policies and plans, your insurance coverage and of course your plans for your family members left behind. All of these things must be co-ordinated so that your documents don't contradict each other or create confusion that will end up being sorted out by the courts.

2.  An Enduring Power of Attorney, which is also called a Continuing Power of Attorney, or a Power of Attorney for Property. This document allows you to appoint someone to make financial decisions for you if you should be unable to do so for yourself. Most commonly this document is used when a person develops dementia, but it may also be used if you should be severely injured in an accident or become very ill.

3.  An Advance Health Care Directive, also called a Personal Directive or Health Care Proxy. The person you name in this document will be able to make decisions for you about medical issues, health care and personal issues. The document should also contain your instructions on end-of-life decisions.

The above three documents are usually sufficient for individuals whose estates are not complicated. Business owners may find that they need additional estate planning documents, such as:

4.  Shareholders' Agreement, sometimes called a buy/sell agreement. While not solely an estate planning document, a shareholders' agreement should address what is to happen with shares of a privately held company if the owner should pass away or lose mental capacity.

5.  Life insurance to fund the buy/sell agreement.

6.  A written business succession plan that sets out who is to take over the family business, and how that plan is to be implemented financially.

7.  A holding company may be needed to funnel excess cash out of an operating company to improve the potential tax situation.

Individuals differ, and so do their estate-planning needs. You may find that you have specific goals that will require additional documents to be made. For example, you may wish to leave a Memorandum of Personal Effects that gives certain items to specific people on your passing. You may wish to leave a Letter to Executor that leaves personal messages, gives further explanations or expresses wishes to your family members.

Start by making sure that you have the first three documents in place and keep them up to date. An experienced estate planning lawyer can help you decide what else you might need or want to protect your loved ones.

What happens if the gift you were left in the will no longer exists?

Here's something that many beneficiaries and executors have had to figure out, amicably or otherwise - what happens when a specific gift left to the beneficiary in a will no longer exists? Does the beneficiary get something else instead, or is he simply out of luck? Click here to read a short but informative article about what happens in this case and how you can prevent this from happening in  your own will, from www.estatedebate.com.

Estate planning checklist before you travel

I hope you all returned safe and sound from your Christmas travels. November and December are often extremely busy months for estate lawyers because so many people realize right before they travel that they haven't yet put their wills in place.

Getting your wills done before you travel is a good thing. Peace of mind is important, whether you're the one traveling or the ones left at home. However, there is more to it than just a will. Check out the following article from www.estateplanning.com that provides a checklist of estate planning items to get organized before you travel. Click here to read it. The article is American but still applies in almost all aspects.

Why you should make estate planning a priority in 2013

Estate planning isn't really about money. Many people jokingly tell me that they haven't done any estate planning because they don't have much of an estate. I understand that not everyone has tons of assets, but what is being missed is that your marriage or divorce, your joint account with your kids, and your insurance policies are all big parts of your estate plan. When you pass away, what assets you do own are going to change hands, and perhaps not in the way you anticipate or would like.

The National Post has a recent article that discusses some of these issues and the way they impact our lives. It makes a lot of sense, and applies to each and every one of us who has a spouse, divorce, children, life insurance policy, RRSP, TFSA... you get the point.  Click here to read the article.

Don't stop at having a will - plan for incapacity as well

This week I'm travelling across the western and central part of the province, participating in learning sessions with bank branch staff and meeting with clients to talk about estate planning. I've been surprised to find that although many clients have wills, so far not a single one has an Enduring Power of Attorney and Health Care Directive in place.

This worries me. A will is only one part of estate planning. Certainly it's a major part, but on it's own, a will isn't going to help you meet all of the challenges you and your family may face down the road. Planning for a possible loss of mental capacity is essential. It's no less important than your will, as it fills a completely different need than does your will.

Almost all of us know of someone - a relative, neighbour or friend - who has experienced a loss of mental capacity because of aging, illness or accident. One client I met recently has told me that his aging father's dementia quickly caused personality changes. The father is now suspicious and angry (perhaps frightened at what is happening as well) and lashes out physically and verbally. The client's mother is upset and exhausted. The client is anxious to help but since there is neither a Power of Attorney nor a Health Care Directive in place, he has no legal authority to do anything to help his parents unless he applies to the court.

Having a will in place doesn't help an individual in this unfortunate position, because a will doesn't kick in until a person dies. Imagine seeing your parents going through something so upsetting, and being helpless to act without the cost and delay of asking a judge to grant you permission to take control of your parent's affairs. Or. imagine that you're the one experiencing loss of capacity, and your children have to try to deal with it without you having preparing any documents to help them. This is definitely doing things the hard way.

If you are thinking about having a will prepared, I urge you to have the two documents that deal with mental incapacity - the Power of Attorney to deal with finances and a Health Care Directive to deal with medical decisions  - done at the same time. And if you already have a will, maybe it's time to dust it off, bring it up to date and have your incapacity documents prepared as well.

Don't leave this very important area of planning to chance. None of us knows what will happen in the future, but given the number of individuals who experience a loss of mental capacity, it's a risk worth planning around.

The many types of wills - a dictionary

A will is a will, right? Most of us think we'd know a will if we saw one, but in fact there are several types of wills out there. Whether you're an executor trying to deal with an estate or you're trying to figure out what kind of will you need yourself, the array of possible wills can be confusing. I've often heard and seen the names of the various types of documents being misused, even by professional advisors. Wouldn't it be great if you only had a dictionary to tell you the difference between them? Read on, as I've devised my own little lexicon of wills to help you navigate the world of wills:

Codicil - This is an amendment to a will that is made when there is already a valid will in place. It is intended to make only a small change or supplement to the existing will without invalidating the will. It has the same signing and witnessing requirements as a formal will. Codicils, popular in the days when wills had to be typed individually, are beginning to fall out of favour with the advent of technology that allows us to prepare a new will quickly. They are valid everywhere in Canada.

Formal will, a.k.a. conventional will - This refers to a standard will that is prepared on a computer or word processor and that follows the rules of a valid will. This usually means that the will is signed at the end by the testator (i.e. the person whose will it is) in front of two witnesses who are present at the same time. These are valid everywhere in Canada.

Holograph will - This refers to a will that is 100% in the handwriting of the testator. It doesn't need witnesses, but it must be signed and dated by the testator. Holograph wills are valid in most, but not all, Canadian provinces and territories.

International will - This type of will is relatively rare, as it is only useful to high net worth people who have probatable assets in different countries and who do not choose to prepare separate wills in those countries. The form of an international will is set by a covention that is recognized internationally.

Joint will - This refers to a will which is intended to cover the wishes of two separate people (usually a husband and wife) in one document. It's an old-fashioned concept which was based as much on the wish to save typing time as it was on the lack of women's property rights. Today these wills are almost never prepared in Canada due to the legal complications that often arise when one person dies, leaving the other without a will.

Living will - A living will isn't actually a will at all. It's an American concept, a document in which an individual leaves instructions to cover an end-of-life or "pull the plug" situation. In Canada, living wills form part of health care directives (also known as personal directives, advance care directive and health care proxy, among other variations).

Military will - In general, an individual has to be at least the age of majority to make a valid will. An exception to that rule exists so that personnel of the armed forces, mariners and seaman in the course of a voyage may make a will even if they are under age. This type of will needs to be signed and dated but does not need witnesses. It may be formal or holographic. The phrase "military will" is more of a slang term than a legal term.

Mirror will, a.k.a. reciprocal will - This type of will is usually made by husbands and wives, but may also be made by others. Two mirror wills contain identical provisions, such as a husband and wife both leaving their estate to their children when both parents have died. They may be formal or holographic. I have often seen these wills referred to as mutual wills, but they are not. When a couple has mirror wills and one of them dies, the surviving spouse is free to change his or her will if they so choose.

Mutual will - This is a specialized type of will in which the two people (usually husband and wife) who make the wills specifically agree to a certain arrangement of disposing of their property. The agreement is a contract that is enforceable by law, so when one spouse dies, the other is not legally able to change the will. The agreement has to be spelled out very specifically in the document, or in a separate side agreement that is referenced in the will. These wills are not seen every day, but are still used when appropriate, such as in second marriages when both parties agree to leave their estates to their own children. These wills are almost never holographic as it's almost impossible to get the contractual obligations correct without the help of a lawyer.

Notarial will - This term refers to a will made in compliance with Quebec's Civil Code. The will would be signed in front of a notary and a witness.

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

A legal will is worth the time and money

This article from the Globe and Mail talks about the reasons you need a will. Some of theme will sound familiar to those of you who read this blog regularly, but they can't be said often enough. Click here to read the article, which is packed with good information.

BC judge rewrites woman's will, giving daughter millions more

There is another new case from BC (estate of Norma Lougheed) in which a judge overturned an individual's will to redistribute the estate. This time it resulted in a daughter receiving another $5million over and above what her mother had left her. Click here to read the story.

I read some of the comments readers had attached to that story in the Globe and Mail, many of whom were outraged at the decision. One comment I read several times was "what's the point of making a will if it's going to be changed anyway?" If that's how you're reacting, please keep in mind that not all jurisdictions have the same law (the Wills Variation Act) as BC.

What to do after your Will is signed

You've been to the lawyer's office and signed your crisp, new Will document. You've set up an estate plan and documented everything properly. Now what? There are a few things you might want to do:

1.  Store the original Will somewhere safe, i.e. fireproof, waterproof and snoop-proof. Many lawyers will store clients' Wills at no charge in their office vaults. Trust companies do the same for their customers. A bank safety deposit box is a popular choice. A home safe may also be used, but I don't recommend a drawer or filing cabinet unless it's fireproof and locked. Note that floor safes are fireproof but not always waterproof.

2.  Put all of your important documents together. Wherever you store your Will, consider also storing your Enduring Power of Attorney, birth certificates, marriage certificate, documents relating to any trusts that involve you, title to your house, insurance policies, passport, divorce papers, and business documents such as shareholder's agreement. As a side note, I don't recommend that Personal (health care) Directives be stored at the lawyer's office, trust company or bank because this may make them unavailable in a medical emergency.

3.  Tell your executor and alternate executor where the original Will has been stored.

4.  Decide whether you want to give anyone a copy of your Will. There is no rule that says you must share the contents of your Will with anyone, nor is there a rule that forbids it. It's up to you. Weigh the factors of privacy vs full disclosure.

5.  Make a list of your assets and liabilties. Include descriptions that state, for example, whether you bank at Scotia or CIBC, which insurance company insures your life and your house, and the full name of the company you work for. The list doesn't have to be fancy. Plenty of law firms feature a questionnaire on their websites; you could download and/or print one to use to create your list. Spending an hour or so making this list and occasionally updating it will one day save your executor countless hours of searching and guessing.

Nobel Prizes Were A Planned Gift

Did you know that the world-famous Nobel Prizes were the result of a gift left in a Will? For some great information about Alfred Nobel, his Will and the Nobel Prize, click the link below.

Nobel Prizes Were A Planned Gift

Panama court throws out will that left millions to poor children

This isn't a good news story at all, but illustrates what happens when a person's estate planning is inadequate. Click here to read the story.

The worst ways to change your Will

Plans change over time. Over the course of years, people come into your life or disappear from it, your wealth changes, and your wishes for the distribution of your estate after you pass away are shaped by your experiences and your relationships. No wonder so many people want to make changes to their Wills. Unfortunately, not everyone who makes a change to a Will does so in a way that is going to actually bring about the desired change.

Many people want to change their Wills themselves without consulting a lawyer because they feel the change is simple, or they don't want to pay legal fees, or both. This doesn't always work out well. There are rarely explanations available for the speed and secrecy of home-made changes, which cause family members to become suspicious. Here are some of the wrong ways to go about changing your Will:

1.  Scribbling over or crossing out the parts you no longer want - Unfortunately, it may be impossible to tell whether it was actually you who crossed it out, or whether it was someone else who didn't like the contents of your Will. Remember, you won't be around to explain yourself when your Will is needed. Even if you initial the crossing out, this is likely not going to stand up to examination if the Will itself had been signed in front of witnesses who didn't also initial the crossing out. Also, there is the possibility that the words you cross out may affect the meaning of other words around it so that you change more than you meant to. Finally, there is the question of whether you had mental capacity to make changes at the time you did the crossing out.

2.  Writing notes in the margins - Similar problems arise with this as with crossing out, in terms of witnessing and mental capacity. Unfortunately, the inclusion of notes can be even worse than crossing out. Notes tend to be very cryptic to those reading them. It's rare that these notes can be fully understood by others due to abbreviations, lack of punctuation and lack of precision (such as identifying which policy, item or fund you are talking about).

3.  Inserting a new page - There will be questions about when the new page was inserted and who inserted it. It's unlikely to stand up as legally valid, largely because of witnessing issues. The issue of capacity arises again, and if the new page is favourable to a certain person, it may appear that the person influenced you to make the change.

4.  Destroying the Will - While this would certainly be legally valid, assuming you had the mental capacity to intend to revoke your Will, it has the unfortunate effect of leaving you with no Will at all. If you are going to destroy your Will, wait until a new one has been signed.

5.  Telling the lawyer you want changes but then never getting around to signing the new Will - I've been asked this question dozens of times. Clients believe that if they see the lawyer and talk about new wishes, this "means something" and will act as a new Will. It won't. You must actually sign the new Will to make it effective. A few times, clients ask whether they can just sign the page with the notes I've taken during the meeting. That won't work either.

6.  Telling everyone in your family that you're making a new Will but then not doing so - This is probably the worst of all. All you've done is create confusion after your death over whether your family has the right Will, delays while they search for the new one, and possibly suspicion over who "lost" the new Will. Talking about your intentions doesn't turn them into a legally enforceable Will.

The better approach is to have a new Will properly made to incorporate the changes you want. If the change really is small, you could keep the Will but have a brief Codicil made. A Codicil simply amends an existing valid Will. If the changes are to do with personal property such as household goods, jewelry, artwork or the contents of a workshop, perhaps a Memorandum of Personal Effects would be a good idea.

Woman's will written on a piece of wood

We're used to seeing Wills written on paper, of course, but this story is about a woman who used the material she had at hand - a piece of wood. Any guesses on whether or not the court allowed it as a valid Will? Read this story from the Newark Advocate to find out. The photo attached by Michael Lehmkuhle of the Advocate, is of Bill Fisher of the probate court that dealt with the issue after the woman who wrote the Will died.

Holy Matrimony! Time to review your will

This is a good reminder to all of you who tied the knot over the summer. Marriage revokes a Will. Time to take a look at it with your new family in mind. Click here to read this Globe & Mail article.

How bulletproof is your Will?

Having your executor or your family members end up in court because of a poorly-written Will is the stuff of nightmares. While it is never possible to make any legal document 100% bulletproof, there are many ways to make sure a Will is as strong as possible. Ask yourself whether the following statements are true of your own Will:

• You've appointed an executor/trustee who is physically and emotionally capable of doing the job you're asking him or her to do.
• Your executor/trustee is not in a conflict of interest position.
• You are not forcing people who don't get along normally to act together as executors.
• You've appointed at least one alternate executor.
• Your Will sets out how much your executor is to be paid for acting as executor.
• You've discussed your wishes for the disposition of your remains with your executors.
• You've appointed a guardian for minors.
• You are aware of your legal obligation to provide adequate support for your spouse, your minor children, and adult handicapped children, and have provided that support in your Will.
• Your Will provides for a gift to be given to an alternate beneficiary if the first-named beneficiary should die before you.
• Inheritances for minors and handicapped adults are to be held in trusts.
• You've set up trusts for any others you feel might be vulnerable if given money, such as a young adult or a child with an addiction.
• Your Will gives clear instructions on how trusts are to be handled, such as describing the age at which minors may inherit their shares, allowing for encroachment on an as-needed basis, and dealing with the "even-hand" rule.
• Your Will describes who is entitled to receive personal and sentimental items, and how such items are to be divided among them.
• You and your accountant have discussed the tax implications of disposing of your real estate, your business, your personal property and your financial assets.
• You've taken steps to minimize taxation on death, and to have cash available for tax that can't be avoided.
• Your beneficiary designations (on life insurance, RRSP, RRIF, LIRA, TFSA etc) are up to date and do not conflict with anything in the Will.
• You thoroughly understand the legal and tax implications of jointly-owned property.
• You have not put your children's names on any of your assets without legal advice.
• Your shareholders agreement doesn't conflict with anything in the Will.
• The Will supports and carries out the plans for business succession planning that you've already begun.
• Your Will works together well with your spouse's Will.
• Your Will contains extensive powers for use by the executors and trustees so that they will not have to waste time and money in court asking for permission to take steps on your estate.
• Your Will contains a concise line or two to explain a provision in your Will that appears at first glance to be unfair or illogical.
• Your wishes are clear and complete. Your executor will have no trouble identifying the beneficiaries and the property each one is to receive.
• You haven't imposed any impossible or unreasonable conditions on the beneficiaries.
• You haven't made any promises to anyone that are ignored in the Will.
• You haven't made any changes to your Will against your better judgment or because someone was forcing or pestering you to make changes.
• You weren't confused, disoriented or medicated on the day you gave your instructions for your Will or  on the day you signed it. You have a clear memory of your involvement in the discussion.
• Nobody else spoke for you during your meeting with the lawyer; you were able to speak for yourself.
• Your Will was properly signed and witnessed.
• The Will was not made before you were married.
• The Will has been reviewed periodically since it was first made.
• The Will has not been written on, nor have parts of it been crossed out.
• The Will was drawn up by an experienced lawyer who you are certain understands your goals and concerns for estate planning.
• The Will is written in language that you can understand without needing a lawyer present to translate.
• The document is accompanied by an Enduring Power of Attorney and healthcare directive.
• The Will has been reviewed with your accountant or financial advisor.

The Importance of Up-to-Date Powers of Attorney and Wills

A recent case from the Alberta Court of Queen's Bench should serve as a warning to all Canadians who don't have Wills, and who don't have Enduring (Continuing) powers of attorney or health care directives. The poor fellow in this case didn't have any of those documents, and lost much of his modest estate to legal fees and court filing fees. Not to mention that his family ended up in court to argue over who was to be in charge. Read a discussion of the case - and what we should all learn from it - by Wise Law Office (Toronto) by clicking on the link below.


The Importance of Up-to-Date Powers of Attorney and Wills