Turning our minds to estate planning and the importance of maintaining an up-to-date estate plan

March 19, 2020 | Jennifer A. N. Corak, Jordyn Allan, Wendi P. Crowe, Sandra L. Enticknap, Troy McEachren, Nathalie Marchand

A number of factors motivate individuals to engage in the estate planning process. Common motivating factors include a change in relationship status, births or deaths in one’s family, a change in net worth and a health diagnosis that turns one’s mind to their own mortality. In trying times, we are reminded of the importance of ensuring our estate plans are in order.

The estate planning process involves considering how one’s assets are to be distributed following one’s death and then executing one or more documents intended to govern such distribution – commonly, Wills, beneficiary designations and insurance declarations. The process also involves planning for disability and incapacity (i.e. where one becomes unable to manage one’s own financial matters and/or make personal care and treatment decisions for oneself). Incapacity planning generally involves executing documents that appoint someone to act as a substitute decision maker. In Canada, estate and succession law is governed at the provincial level, resulting not only in substantial and procedural differences in documents, but also in the use of different terminology. A chart outlining some key terms in British Columbia, Alberta, Saskatchewan, Ontario and Quebec can be found at the end of this article as Figure 1.

Given that estate and succession law is legislated provincially, life events can effect an estate plan differently depending on the province in which the individual lives. For those who have previously engaged in the estate planning process and executed a Will, it is important to review such Will regularly and following a change in circumstances, taking into consideration the law that applies to the specific individual.

For example, consider an individual in Ontario who marries after signing a Will that was not made in contemplation of marriage.  Such individual may be surprised to find out that marriage revoked the Will.[1] If such individual dies before executing a new Will, the laws of intestacy (as set out in the Succession Law Reform Act[2] (the “SLRA”)) will apply to the distribution of their estate. In this example, assuming the deceased was still married and was not survived by issue, the deceased’s assets would pass to their surviving spouse. If, however, this individual was survived by one or more children, the estate would be divided so that: (1) the deceased’s spouse would receive a preferential share in an amount prescribed by regulation, which is currently $200,000; and (2) the remainder of the estate would be divided between the spouse and the deceased’s child or children (as the case may be).[3]

If, however, the individual in the above example was resident in Quebec, Alberta or British Columbia, the subsequent marriage would not revoke the Will.  It is, therefore, critical to review and update one’s Will upon marriage to ensure that the new spouse is included appropriately.

In the absence of a valid Will for any reason, the intestacy laws in Quebec, Alberta, Saskatchewan or British Columbia (as the case may be) would dictate how this individual’s estate would be distributed. In British Columbia for example, under the Wills, Estates and Succession Act (the “WESA”), the preferential share of the spouse would be $300,000 if all children were children of both the individual and the spouse but only be $150,000 if they were not. The spouse also gets the “household furnishings”; and if the spousal home was owned by the deceased individual, the spouse has the right to buy the spousal home to satisfy in whole or part the spouse’s interest in the estate. The remainder is then split 50% to the spouse and 50% to the children equally. In Quebec, the spouse is entitled to one-third of the succession while two-thirds of the succession is divided equally amongst the children. New legislation in Saskatchewan (discussed below) provides that where the intestate[4] died leaving a spouse and one or more children, and all of the intestate’s children are also the natural or adopted children of the surviving spouse, the intestate’s spouse receives the entirety of the estate. Similar rules apply in Alberta.

Intestacy laws do not take into consideration the deceased’s personal circumstances.[5] For instance, a child who is not, in the eyes of their parent(s), mature enough to inherit a sum of money will still receive his or her entire inheritance upon attaining the age of majority. Nor do intestacy laws consider the health of the beneficiary. Failure to have a Will could disqualify a disabled beneficiary from receiving government support payments.[6] More distant family, friends and charities are not included unless one leaves a valid Will.

The above-noted factors also serve as examples of risks associated with not maintaining an up-to-date estate plan. As a minor beneficiary matures, the individual may wish to revise their Will to provide that the beneficiary’s entitlement be held in trust for a longer or shorter period of time. Planning can also be put in place for a beneficiary receiving government support payments without compromising his or her entitlement to such payments. A Will can also provide for legacies and charitable bequests and can include a broader or narrower list of beneficiaries than is provided in the relevant legislation.

A review of one’s circumstances involves a review of their assets. Individuals with assets in multiple provinces (or multiple countries) may wish to execute multiple Wills to reduce the amount of probate tax payable and allow for the administration process to be undertaken in the various jurisdictions concurrently. Depending on the nature of the assets owned in each jurisdiction, it may not be practical to have only one Will governing all of the individual’s assets. Owners of shares in private corporations often wish to engage in specific estate and tax planning. In provinces with high probate taxes, this may mean the execution of multiple Wills or the use of an inter vivos trust.

Finally, legislative changes may make it advisable to revisit and possibly revise one’s estate plan. For example, when the WESA came into force in British Columbia in 2014, as noted above the law was changed to provide that marriage no longer revokes a Will. Provisions were also added that if spouses separate, they can cease to be spouses; and further if they are no longer spouses, then any gift under an existing Will is void.

As of January 1, 2020, Alberta’s matrimonial property laws have been extended and apply to common law relationships where the couple has cohabited for three years or more or have a child together.[7] If such a relationship breaks down, the partners are entitled to share in each other’s property from the date that cohabitation began, even if that was long before the new legislation came into force. Affected couples may wish to consider supplementing their estate plan with a Cohabitation Agreement, setting out how they wish their property to be shared (or not).

Significant changes were made to Saskatchewan’s intestate succession laws as of October 1, 2019, when The Intestate Succession Act, 2019[8] came into force. Such changes included new rules for determining when the intestate’s spouse is no longer entitled to any portion of the intestate’s estate. Specifically, if a couple was legally married but living separate and apart for two years at the time of the intestate’s death, the surviving spouse is no longer entitled to receive any of the deceased’s estate.

Estate plans are not static; they must evolve over time to suit changes to assets and the changing family situation and legal environment in which individuals find themselves. Estate plans are also fact specific and, therefore, vary from person to person. It is important to seek the advice of a lawyer who practices in this area when putting together an estate plan. If you wish to explore further the issues discussed in this article, please feel free to contact a member of our national Private Client Services group.

Figure 1: Terminology Regarding Documents Appointing Substitute Decision Makers
Document(s) related to financial decisionsDocument(s) related to personal care decisions
British Columbia(1) Enduring power of attorney

(2) Representation agreement under Section 7 for routine management of financial affairs for persons of diminished capacity

(1) Representation Agreement under Section 9 for fully capable persons

(2) Representation Agreement under Section 7 for persons with diminished capacity

AlbertaEnduring power of attorney(1) Personal directive

(2) Supported Decision-Making Authorization

Saskatchewan(1) Enduring power of attorney (property)

(2) Contingent Power of Attorney (property)

(1) Enduring power of attorney (personal)

(2) Contingent Power of Attorney (personal)

(3) Directive

(4) Proxy

Ontario(1) Continuing Power of Attorney for Property

(2) Power of Attorney

Power of Attorney for Personal Care
QuebecProtection MandateProtection Mandate

 

______________________________

[1] In Saskatchewan, pursuant to section 17 of The Wills Act, 1996 (the “Wills Act”), a Will is revoked by marriage and by a spousal relationship that has been continuous for two years, subject to certain exceptions set out at subsections 17(2) and 17(3) of the Wills Act.

[2] Succession Law Reform Act, R.S.O. 1990, c. 26 [SLRA].

[3] If the deceased was survived by a spouse and one child, the SLRA provides that the remainder of the estate would be divided equally between the surviving spouse and the child.  If the deceased was survived by a spouse and two or more children, the SLRA provides that the remainder of the estate would be divided so that the spouse receives one-third, and the remaining two-thirds is divided between or among the children.

[4] References to the “intestate” refer to the individual who died without a valid Will.

[5] As mentioned earlier, in Ontario, the laws of intestacy are set out in the SLRA.  The following pieces of legislation govern intestate succession in some other provinces: (a) in British Columbia, Wills, Estates, and Succession Act, S.B.C. 2009, c. 13, Part 3; (b) in Alberta, Wills and Succession Act, S.A. 2010, c. W-12.2, Part 3; (c) in Saskatchewan, Intestate Succession Act, S.S. 1996, c. I-13.1; and (d) articles 653 and following of the Civil Code of Québec.

[6] Such as Assured Income for the Severely Handicapped (AISH)  in Alberta, Saskatchewan Assured Income for Disability (SAID) Program in Saskatchewan, and the Ontario Disability Support Program (ODSP) in Ontario.  Relevant legislation in Quebec is the Individual and Family Assistance Act, CQLR c A-13.1.1, and in British Columbia is Employment and Assistance for Persons with Disabilities Act, SBC 2002 chapter 41.

[7] Family Property Act, RSA 2000 c. F-4.7.

[8] The Intestate Succession Act, 2019, SS 2019, c I-13.2.

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