What happens if I don’t have a will?
Very few people get excited about estate planning, except for financial planners, and we’re admittedly strange folks. Talking about and planning for the moment of your death is not only dark and creepy but also kind of boring – unless you’re the type who gets super excited about understanding how law, tax, investments, and insurance all roll together.
Again, we financial planners are mighty strange. It’s why you contact us when this kind of thing comes up, and why we still have jobs.
It’s very common for our clients to either have super old wills that they can’t find or definitely give their stuff to the wrong people, or to just not have wills at all. You know you should get it updated, and you know it’s important, but for some reason, you just haven’t gotten around to it.
Why? Well, because it’s boring, kind of depressing, it costs money, and you’ll never personally experience the positive results. Like any other intelligent human, you’d much rather spend your money on something else that will be important really quickly, like paying off your debt or buying a new car, or just taking a vacation.
We get it. Those are good reasons to avoid it. At the same time, there are great reasons to get it done, the most important being: You love somebody. Or several somebodies. You want them to be okay.
There are hundreds of other reasons we could get into but that’s the real sticker right there. You have people you care about, and creating a safe existence for them if you can’t be there personally is one of the most loving things you can do.
But say you don’t have a will, and while it’s definitely on your to-do list… you’re totally going to do that… next month… you just happen to die unexpectedly (expected deaths aren’t as common as we’d hope)… without a will. What happens?
First, it’s important to note that each province and territory in Canada has its own estate law. That means that the rules are going to differ slightly depending on what governing body has jurisdiction over your estate. What we talk about below is super general. We’ve provided links to the rules in each province and territory at the end.
Family members may apply to the courts to act as the estate administrator or trustee. If there aren’t any immediate family members willing or able to act as administrator, then the court may appoint the Public Guardian and Trustee or a trust company.
The administrator/trustee will take on the responsibilities of the executor, including:
- Making funeral arrangements
- Identifying, securing, and dealing with assets
- Obtaining court authority
- Identifying and paying debts and claims
- Filing tax returns
- Dealing with any legal issues
- Identifying, locating, and distributing the balance of the estate to the rightful successors and/or beneficiaries
Distribution will again differ depending on the jurisdiction, but a rough overview looks like this:
- If you have a spouse, but no children, your spouse will inherit most, if not all of your estate (after debts are paid). Quebec gives this estate ⅔ to spouse and ⅓ to parents. Remember that the definition of “spouse” may differ from jurisdiction, and it’s possible that more than one person could legally fit that definition.
- If you have a spouse and children… some provinces give a “preferential share” of the estate to the spouse. That share can be anywhere from $50,000 to $300,000. The balance will likely be divided:
- If you have one spouse and one child, in most instances the residue is split equally.
- If you have more than one child, your spouse may receive ⅓ and your children may have equal shares of the balance.
- In Alberta, if the children are children of you and your spouse, then your spouse would receive the entire estate. Check the rules of your province or territory to be certain.
- If you have children but no spouse, the children will usually inherit equal portions of your estate.
- If you have no spouse or children, then your parents usually inherit.
- If you have no spouse, children, or parents, then your siblings. If no siblings, then nieces and nephews. If you don’t have nieces or nephews, then whomever your next of kin may be.
- If you don’t have any next-of-kin, then your estate usually goes to the government.
Management of a Child’s Share
The laws of your province or territory may require that the government protect your child’s legal interest, and may require that the Public Guardian & Trustee hold your child’s share of your estate in trust until they reach the age of majority.
Particularly if you wish to have your child’s share used for their care and benefit before they reach the age of majority, this may be problematic for you, and their surviving parent.
Joint Assets, Registered Assets, and Life Insurance
If you own an asset joint (with rights of survivorship) with another individual, they will become the sole owner of that asset when you pass away.
If you have named a beneficiary on a registered asset (RRSP, TFSA, etc) then that beneficiary will receive the proceeds when you pass away.
If you have named a beneficiary on your life insurance, that beneficiary will receive the proceeds when you pass away.
These items will not make up part of your estate. However, tax may still be applicable when they transfer to your beneficiary.
Rules in Your Jurisdiction
Find your province or territory below for the legislation that governs intestate distribution:
The short story is that you likely need a will. You probably love at least one person and you probably don’t want them to go through paperwork and financial stress at the same time they’re grieving the loss of you. Get them something nice – a well planned estate.