Deciding whether you need to have a properly drafted Will requires you to first understand what happens if you don’t have one. An individual who dies without a valid Will dies intestate. TheSuccession Law Reform Act (the “SLRA”) is the law in Ontario which dictates who is to receive the assets (including money, real estate and other property) of an individual who dies without a valid Will. Before such distributions are made, the deceased’s debts must be paid from the assets of the estate.
The SLRA sets out clear rules regarding how a deceased individual’s assets are to be distributed, which is based on family relationships. It starts by looking at whether the deceased had a spouse and/or children, along with the value of the estate. If the deceased died leaving no spouse or children surviving him or her, then the deceased’s estate will get distributed to the relative(s) of the nearest degree.
However, the value of an individual’s debts at the time of their death may be greater than that of their assets. Debts owing by an estate are paid out of the assets of the estate before anything is paid to the beneficiaries of the estate. If there are insufficient assets in the estate to cover the debts, it is important to note that this ordinarily does not require the beneficiaries (in the case of an intestacy, the family members) of the deceased to pay these debts. An estate trustee for an estate with greater debts than assets should seek legal advice prior to making any payments. In some cases, the creditor may simply ‘write-off’ the debt if it is clear that they will not be able to collect from the estate. This may not be the case if there was a co-signor on the debt.
An example of a situation where there is a co-signor on a debt is as follows. A dies soon after she graduates from university. At the time of her death she has substantial student debt and no real assets. If there is no co-signor on her debt, it may be written-off. However, if someone co-signed the loan (for example, a parent), the co-signor may be responsible for the debt under the agreement.
The above example demonstrates the importance of understanding how a loan agreement is structured and how the death of the borrower will affect the loan, particularly if there is more than one person being bound to the agreement as a debtor. If there is a co-signor, another consideration is whether the deceased obtained insurance which releases the co-signor from liability for the balance of the debt on death of the main borrower.
While the Succession Law Reform Act offers a structure for dealing with an estate of someone who dies without a valid Will, an intestacy may be significantly more complex than it would have been had the individual drafted a Will. It is critical to understand what happens when an individual dies without a Will before making an informed decision about your own situation. Legal advice can help you make the appropriate decision and understand how events in your life may alter your need for a properly drafted Will.