For different reasons, some Canadians feel they can figure out their own tax and estate plans either by going online or with an inexpensive store-bought will kit. Unfortunately, many will kits do not include key elements, without which their wishes may be misinterpreted. Worse, parts of the will could be invalidated.
For example, a father could have named his surviving spouse and their two unmarried children as equal beneficiaries of his estate and named one of his children as their executor. But if all four family members were to die in a common disaster, their estate would not have an alternate executor or any contingent beneficiaries, resulting in serious issues and delays in resolving their final estate.
Will kits may also contain clauses or words in which their intent may not be clear to the courts due either to the ambiguity of the clauses or the lack of clarity of the language used. Such clauses or words may be stricken from the will or end up given a contrary meaning, effectively circumventing the wishes of the individual, called the “testator.”
People who use will kits may not realize that a fundamental requirement for a will to be valid is that the person wanting the will drafted has mental capacity. If a will and estate lawyer drafts the will, that lawyer will exercise due diligence and make sure the testator has the capacity to execute the will. With an off-the-rack will, that protection may not be there leaving the will open to be challenged on the basis of lack of capacity of the testator.
When financial advisors and estate lawyers work together, they know the status and dynamics of their client’s family and as such are able to incorporate concerns such as the following into a will:
• Providing for a disabled child (e.g., RDSP, qualified disability trust, Henson style trust).
• Minimizing probate tax (e.g., via alter ego trust, inter vivos gifts, dual wills).
• Minimizing income taxes at the time of death (e.g., via inter vivos gifting, qualified beneficiary RRSP/RRIF designation).
• Passing the family cottage to children (e.g., via inter vivos or testamentary trust).
• Protecting a child’s inheritance from divorce proceedings (e.g., gifting directly into a separate sole account, creating discretionary trust).
• Having assets bypass the estate (e.g., through beneficiary designations, successor holders, joint tenancy with right of survivorship).
• Protecting wealth from spendthrift beneficiaries (e.g., using a fully discretionary trust).
• Preparing for lost capacity (e.g., creating an enduring power of attorney, personal/health care directive, representation agreement, etc.).
• Using appropriate insurance products for estate planning purposes.
• Supporting charities (e.g., planned giving, using a donor-advised fund).
• Insuring the executor.
This is just a partial list of the many things an individual needs to consider when drafting a will. I always recommend that people work with a lawyer and other professionals to protect both them and their family and to ensure their wills reflect their true intentions.
Peter Boys CAFA “The Financial Coach”