Wills: Ensuring your wishes are met

For far too many canadians, preparing a will is just too stark a reminder of their inevitable mortality. As a result, a staggering 50 per cent of the population make the fatal mistake of not drawing up even a simple will. Fatal in that if you die without one, you’re deemed to have died “intestate” and your assets will be distributed according to the laws of intestacy of your province. These laws are not only inflexible, but quite often result in unforeseen problems when the time comes to liquidate your estate. Therefore, it’s essential to educate ourselves and our families about exactly what a will is, and why it’s such an important element of estate planning.

A will is the most basic of all financial planning tools. It’s a document whereby an individual, the testator/testatrix, outlines the beneficiaries of their estate and, in some cases, precisely what assets various people should receive. In order for a will to be valid, three conditions must be met: testamentary intention, testamentary capacity, and age of majority. Testamentary intention is required and is usually proven by the statement “This is the last will and testament of me, John Smith, of the City of ABC in the Munipality of XYZ, occupation” outlined at the beginning of the document.

Testamentary capacity pertains to the mental capacity of the testator. The testator must understand the nature of their actions, the extent of the property being disposed and must comprehend and appreciate the claims made in the document. This requirement ensures the testator is mentally competent. An individual who is not mentally competent cannot prepare a valid will. The final requirement is that the testator has reached age of majority, although there are some exceptions to this rule.

Many people think drawing up a will is a process necessary only for the very wealthy. Not so. All individuals, even those of us with modest assets, should prepare a will. It doesn’t have to be complex, although many are. There are two types of wills: holograph and normal. A holograph will is entirely in the handwriting of the testator and signed by them. No presence or signatures of witnesses are required. The drawback of a holograph will is they can be ambiguous, and litigation often results. As well, be advised that not all provinces accept a holograph will. In these, a will must be drawn up by a lawyer and must be signed and initialled by the testator in the presence of two attesting witnesses. The two witnesses must also sign and initial each page of the document.

Now, let’s discuss what items should be included in a will. Firstly, a will identifies the deceased, states it’s a legal document and is the will of the deceased. Secondly, it’s a statement of revocation of all prior wills and codicils, thus, in effect rendering null and void any previous wills prepared. The next set of clauses identifies who is to be appointed as executor and trustee. The duties, decisions and knowledge required to administer an estate demand skill-sets few people possess — not to mention the time required. So choose with care and never without first discussing your expectations with those you’d like to appoint.

The main purpose of a will is to outline for your surviving family and other beneficiaries your specific bequests. This is where you detail what items go to whom, including all tangible assets and investments. Many of the other inclusions are dependent upon your financial and family situation, such as naming guardians for dependent children, establishing trusts for spouses, children, charities, etc., and survivorship provisions for family members. Most wills also outline burial instructions.

In addition to ensuring your estate is distributed according to your wishes, a properly drafted will prevents the government from taking more than its fair share of your estate. Wills that are properly drafted often aim to minimize taxes. Due to the complicated nature of our tax system, it’s important your will is drafted — or at least reviewed — by a professional to ensure all provisions are properly worded and all tax minimization techniques incorporated.

So now’s the time to meet with your lawyer and draft an up-to-date will. For those of you with a valid will in place, be advised your will should be reviewed every three years to determine if your wishes are still accurately outlined, and that the arrangements you’ve requested still make sense. You should also review your will anytime a major change occurs in your life — for example, marriage, children or divorce. For those of you drafting your first will, you should bring with you the following: your birth certificate, marriage certificate, marriage contract (if applicable), divorce or separation papers, statements of investments, RRSP statements, information on real estate holdings, mortgage documentation, life insurance policies, business and partnership agreements and anything else of a financial nature that pertains to you and your family.

Once your will is prepared, signed and accurately reflects your wishes, keep a copy in a safe place and ensure your choice of executor knows were to find it. If something minor should occur that requires a change to your will, you do not need to prepare a new one — a codicil to your will can be prepared outlining the additions or deletions to the main document. Only minor changes can be outlined in a codicil — major events will require that a new will be drafted.

For more information on wills and the important role they play in the estate planning process, contact Merrill Lynch Canada at 1-800-563-6623 for a free copy of their report Will Planning to Meet Your Estate Needs.