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| No Will! - Now What? Many people still do not have a will. Their reasons for not making this important document are many, including: "There’s lots of time", "I really don’t need one since I don’t have much money" and "Everything just goes to my spouse anyway". In fact, every adult should have a will. A will is your final instruction about who should look after your estate and who should get your property. Dying without a will can lead to all sorts of headaches for those left behind. A person who dies without a will is considered to have died intestate. To deal with intestacy, the provincial legislature has established rules for the management and distribution of the estate (see box on page 2). These rules spell out who is entitled and in what proportions. However it does not prescribe how the actual assets are to be dealt with. An executor derives his or her power directly from the will and therefore can begin to administer the deceased’s estate immediately. But where there is no will there is no executor. As a result the deceased’s estate will be effectively frozen until an administrator is appointed by the court, a delay which could result in financial hardship for the family. The court must choose who will administer the estate. And the court-appointed administrator may not have been someone the deceased would have chosen. The application process itself can be time consuming and expensive, particularly since there are a number of documents that have to be prepared, served and filed. The time and expense will increase exponentially if more than one person applies to be the administrator. In addition to the extra expense to the estate, the administrator will have to provide security in the form of an administrative bond or obtain a court order waiving this requirement. The bond is to protect the beneficiaries and creditors of the estate against negligence and/or misappropriation on the part of the administrator. Although the estate administration tax (probate fees) will not have to be paid if a will does not have to be probated, it must be paid before an administrator can be appointed. If the estate has a significant value, then the amount of the tax could run into the thousands of dollars. One of the main obligations of both an executor and an administrator is to track down the deceased’s property. But while the executor will be able to deal with the property in the most beneficial way possible, this may not be so for the administrator. The administrator may have to sell off all the property, whether or not this is the most advantageous course for the estate and the beneficiaries. After paying all debts and funeral expenses, the administrator will then distribute the estate according to the legal formula. Among other things, this legal formula does not provide for common law spouses, regardless of the length of the relationship. In order to obtain anything from the estate, a common law spouse will have to sue, thus contributing to the time and expense of administering the estate. If there is no will, then there has probably been insufficient estate planning. As a result, the estate may have to pay extra income tax. (As noted in previous newsletters, there are often opportunities to save significant amounts of probate fees when a will is drawn.) Still not convinced that a will is a good thing?! - then consider your children. If there is no will, the court is left to choose your children’s guardian. It may not choose the person you would have. In addition, any money that your minor children are entitled to will be administered by the court until they turn 18 at which time the money will be turned over to them. What would you have done with a significant chunk of money when you were 18?! If you would like additional information about drafting a will and estate planning please contact Howard Steinberg or Stan Landau. Distribution on Intestacy |
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