My previous post in this series discussed the first major issue in preparing your Will: the selection of Estate Trustees. Today’s post discusses the second major question: to whom should your assets or property be given? Gifts, bequests or legacies can be to any number of persons or organizations, including charities. Recipients are referred to as beneficiaries. The beneficiaries can be anyone you choose. Many couples choose to provide that all of their assets will be given to the surviving spouse and that on the death of the surviving spouse, all the remaining assets be given to family members. Care should be taken to ensure that the bequests reflect family circumstances and the needs of children. For example, if a child is married, you may wish to provide that the bequest is not to form part of the property to which the child’s spouse can get access in the event of separation or divorce. If a child has children, you may wish to provide that the children take the share of the parent should the parent die. Unless your Will provides otherwise, a gift to a child, grandchild or sibling who predeceases you will be distributed among the beneficiary’s surviving spouse and children as though the beneficiary died intestate. Distribution of property on an intestacy will be discussed in the next blog in this series.
If you choose to give a bequest to a child or to someone who is incapable, you may wish to consider establishing a trust for their benefit. The trustees of the trust may be the same as or different persons than the estate trustees. In the case of a trust for the benefit of a child or incapable person, it is not uncommon for the income to be given to a parent or guardian for the care and education of the child or person with the capital being distributed to the child at the age of majority or other date established under the trust. You can provide for encroachment on the capital in the case of special needs or emergencies.Gifts or bequests made by a Will can be in the form of a stated dollar amount or can be a percentage of the estate. If it is anticipated that the value of the estate may fluctuate substantially, it may be preferable to provide for gifts as a percentage of the estate rather than a stated dollar amount.Spouses and other dependants may be entitled by law to share in your estate, even if you do not name them as beneficiaries.For some types of property, including insurance policies and RRSPs, you may name one or more beneficiaries outside of your Will. One advantage of this is that estate administration tax (formerly, probate fees) will not be payable on property distributed outside of your estate.Some property jointly owned by spouses and other close family members, like a joint bank account or real estate (owned as “joint tenants”, and not as “tenants in common”), cannot be dealt with under your Will. Property jointly owned with right of survivorship automatically becomes the property of the surviving joint owner on the death of the other joint owner. However, joint ownership is not always accompanied by a right of survivorship. Rather, with the exception of transfers to spouses or minor children, the law presumes that if a person is given ownership of an asset and provides nothing in exchange, the person holds that asset not for him or herself, but in trust for the estate of the person who transferred it. Unless there is evidence that the transferor intended a gift, the asset will not become the property of the surviving joint owner, but will pass through the estate in accordance with the Will. You should seek advice and document your intention prior to transferring property into joint ownership in order to avoid disputes and to ensure that your property is distributed as intended.If you have real property or other personal property located outside of Ontario or outside of Canada, it may be worthwhile considering making a Will which would have effect in the jurisdiction where the property is located for the purposes of dealing with that property. In addition to the possibility of saving on estate administration tax and other fees in Ontario, you may make the administration of the estate and the transfer of the out-of-province property much easier for your estate trustee.In Canada, succession duties and death taxes are not imposed, but income taxes must be paid after death, and, as property is deemed to be disposed of on death, accrued capital gains must be included in income. Generally speaking, where assets are given to a spouse, no taxes will be payable. However, on the death of the surviving spouse, taxes will be payable. It may be valuable to discuss whether gifts to designated beneficiaries other than a spouse can be made prior to death, property can be held jointly, or other dispositions made to minimize taxes. On the other hand, a disposition of property means that you will lose control of the property. It is necessary to balance tax savings against loss of control.Gifts or bequests made by a Will to a charity will be deemed to have been made in the year of death, thus giving rise to a tax credit.Most provinces, including Ontario, charge a fee when a Will is probated or certified by the courts. The fee can be as much as 1.5% of the value of the assets flowing through your estate.You may include funeral instructions in your Will, but as the Will is sometimes not looked at until after funeral arrangements are made, it is best to discuss your wishes with your estate trustees or leave instructions in a separate document.It is useful for estate trustees to have broad powers of investment to allow the estate trustees to use discretion in administering the assets of the estate.You should keep a separate list, which can be updated from time to time, of key contacts, including your lawyer, broker and accountant, and of all of your assets, including finances, bank accounts, investments, debts owed to you, insurance, pensions, automobiles, lands, buildings, personal effects, and any other type of property belonging to you. The list should include whether you are the sole owner, or if you own property jointly with others.If you have a number of personal mementos or wish to make specific gifts of personal property to friends, family members and others, you should prepare a separate memorandum listing the personal property and the recipients for the guidance of your estate trustees. This memorandum can be referred to in your Will, but will only be binding if, in addition to being referred to in your Will, it is dated prior to your Will. It is useful to review a Will every five years or so, or if there is a significant change in your circumstances, such as remarriage, death of a spouse, birth of a child and so on.