Wills are amongst the most misunderstood and underestimated legal documents that exist. The phrase I hear often, “It’s ONLY a Will” (dismissive), should actually be, “IT’S MY WILL” (important). Afterall, your Will is a statement of your last wishes and intentions for the disposition of your property.
A Will may be 30 years old and totally out of date with your reality, but if it is not updated before you die, it is still considered an accurate statement of your last wishes.
Elements of a Will
There are 4 elements of a Will:
- Choice of Estate Trustee (Executor)
- Disposition of Assets
- Beneficiaries
- Legalese
Each person who makes a Will has to think about 1, 2, and 3. There are no right choices or wrong choices, only individual choices based on personal circumstances.
The other point to remember is that no matter what, debts have to be paid in full before a beneficiary sees any benefit from your estate.
1. Choice of Estate Trustee
What does an Estate Trustee do?
The Estate Trustee is the one who
- “steps into the shoes” of the deceased
- transacts all of the business on behalf of the estate
- is the “bookkeeper” for the estate, and
- is the one who is responsible for making sure all of the debts and taxes of the estate are paid and the rest is distributed to the beneficiaries.
The list of duties is long. Some duties occur in every estate. Some vary by estate. If an estate involves long term trusts, the Estate Trustee is most often the one who looks after these as well. In short, appointing someone to be your Estate Trustee gives that person a thankless job more than it bestows any honour.
Should you consider one Trustee or multiple Trustees?
The key considerations are:
- How complicated is the estate?
- Who is in the talent pool available to you?
- Does any one person have the time and the tools to do the job?
- If there is to be more than one Trustee, can they work together?
A substitute Estate Trustee should always be named if there is only one. Plan B may become important.
When is it time to look beyond family and friends?
Administering estates can be both time consuming and complicated. Trusts can go on for a long time. Therefore, when deciding on your choice of Estate Trustee it is important to look carefully at your list of “suspects” and decide if they have the necessary time, skill and judgment. The person has to be young enough to outlive their duties. It is not wise to appoint someone who is in his/her 60s who may potentially have to administer trusts for 20 years.
Disposition of Assets
The general rule is that assets are liquidated unless a Will provides instructions to the contrary.
There are 2 kinds of assets to think about: personal stuff and investments/property.
For personal stuff, there are 3 ways to add them to your Will:
- Include an itemized list with your Will
- Prepare a non binding letter of wishes for your Estate Trustee
- Leave disposition to the discretion of your Estate Trustee.
For property/investments the considerations are:
- Are there particular assets that you want to leave to a beneficiary “in kind” ?
- If that asset is significant (e.g. house, cottage, stock portfolio) is there enough left to satisfy the rest of your intentions and wishes?
- Do you give a beneficiary the first right to buy an asset from your estate as opposed to leaving it as a gift? At full value? At a discounted value?
- Do you want to make your kids business partners?
Beneficiaries
Beneficiaries can be just about any person or organization that you wish to leave a gift to. Beneficiaries can be relatives, friends or charities.
No beneficiary receives a gift from an estate before the estate’s debts and expenses have been determined and provided for.
What you leave to beneficiaries should be tackled using different considerations for each kind:
- Charities
- Which one(s)?
- How much?
- Friends, former employees, etc.
- Who?
- How much?
- Is there a gift-over if any are dead?
- Grandchildren
- Do you leave a sum directly to grandchildren or rely on the parents?
- If there is a direct gift, how much?
- At what age is it to be paid?
- Can it be used for any purpose before payout?
- Spouse
- If you are in a relationship other than your first, is there a marriage contract to consider?
- How do you intend to benefit your spouse, if at all?
- With respect to a spouse, you also need to be aware of the family law legislation and the rights it confers.
- Children
- Do any of your children present special concerns such as: not good with money, unstable marriage, failing business, illness, disability?
Estate Shrinkage
It is very important to know approximately how much money you have to plan with.
- Estates shrink.
- Often final income taxes are significant.
- Then there are additional expenses that may include: commissions, fees, Estate Administration Tax (probate fees in the old days), funeral expenses and Trustee compensation and accounting fees.
REMEMBER…. If you run into speed bumps, call your lawyer to discuss the obstacles. There is no need to have everything figured out before you make the appointment.
FINALLY…. Communication is key. This is definitely not the time to keep family secrets. When in doubt, ask. Passing intergenerational wealth is the most important family business there is.
The foregoing is intended for information purposes only and is not legal advice.