November is Make a Will Month. Have you made your Will yet?

If you have, your family will thank you.

If you have not, consider the implications if you die without a will and ask yourself if your family will thank you.

Accounts May Become Frozen

When a person makes a Will, one of the first things the Will says, is who is given the legal authority over the deceased's assets. If there is no Will, then there is no one with legal authority over the assets and it becomes necessary for an application to be made to court for the appointment of an estate administrator (an application for a "Certificate of Appointment of Estate Trustee Without a Will" commonly called an application for probate). It takes time to gather the information needed to prepare and file the application. The courts take time to process the application. In the Greater Toronto Area, it is common to wait 3-6 months for the court to process the application.

During this time, no one has authority to manage the deceased's assets and accounts. While banks may authorize the payment of the funeral bill and estate administration taxes (also commonly called "probate tax"), banks are likely to freeze the accounts. This means that during this 3-6 month waiting period, bills can't be paid and the money necessary for the support of dependents, including a spouse or children, is also frozen.

Investments are usually frozen while the application for probate is in queue. No one will be able to react to market changes to preserve your hard earned money and the investments cannot be liquidated while the family waits for probate.

Who Will Take Control?

When a person makes a Will, they decide who will administer the estate. If there is no Will, there may be a contest about who should be the estate administrator. The Estates Act, R.S.O 1990, c. E.21, determines who has the right to apply to become the estate administrator.

The priority for administrator is the spouse (married or common-law) alone, the next of kin, or a combination of the spouse and next of kin of the deceased. But this is ultimately in the court's discretion and depends on whether the family is in agreement.

Where more than one person who are equal in degree of kindred to the deceased, wish to be appointed alone, or if someone objects to the appointment of a particular individual, it may be necessary to bring an application to court, which involves filing affidavit evidence, delivery of the application to various family members and possibly government agencies (the Office of the Children's Lawyer if a beneficiary is under the age of 18; or the Office of the Public Guardian and Trustee if a beneficiary is an incapable adult), possible cross-examinations, and a hearing before a judge. Throughout this time the accounts and investments and other assets might remain frozen.

Who Will Receive the Estate?

When a person makes a Will, they decide who will receive the assets, when and how they will receive the assets, and in what proportion. If there is no Will, the distribution of the estate is governed by the Succession Law Reform Act, R.S.O. 1990, c. S.26. Where the deceased is survived by a spouse (in this case, a "spouse" means married), and has no children, then the estate will go to the surviving spouse. But if the deceased is married and has children, the first $200,000 will go to the surviving spouse (known as the "preferential share") and the remainder of the estate is divided between the spouse and the children. How much the spouse will receive, depends on the number of children.

This statutory allocation could be problematic if the children are minors. Minors cannot own real property. If the primary asset of the deceased is a home, the home might have to be sold so that the children receive their share of the estate.

The share of minor beneficiaries must usually be paid into court, to be managed by the accountant of the Superior Court of Justice. The accountant will be paid an annual fee for managing the funds, and when the minor turns 18, they will receive their share, regardless of how mature (or immature) they are at that time.

If a person dies without a surviving spouse or children, then the estate is divided among the person's next of kin.

Added Cost

A comprehensive estate plan can minimize income taxes upon death, reduce income tax payable by the beneficiaries who are meant to benefit from the inheritance, minimize probate tax upon death, create trusts for vulnerable beneficiaries and reduce or altogether eliminate the need for court intervention.

If there is no Will, these opportunities may be lost. In addition to these costs is the cost for the estate administrator to post a bond. With limited exceptions, every person to whom a grant of administration is given is required to post a bond, for the protection of the beneficiaries and creditors of the deceased. The Estates Act requires the bond to be in an amount double the value of the deceased's estate, unless a judge orders otherwise.

Have you made your Will yet?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.