Your Will and You

A will is not about death, it is about life — the life and protection of your loved ones and the appropriate level of support for those organizations which you hold dear. Without a will, your best intentions and promises made in life may not be realized. You should have a will.

What is a will?

A will is a written document, properly executed, by which you specify how your property is to be distributed after your death.

Advantages:

• It provides financial security for your family and others;
• Your estate is divided according to your wishes;
• It makes a statement on your values in life;
• It allows you to make a meaningful contribution to organizations in which you have an enduring interest;
• It may minimize taxes due upon death.

Without a will

If you die without a will, i.e. intestate, by default you will be allowing your province to decide the distribution of your estate and its executor.

Consequences:

• Your life’s earnings could easily be depleted by taxes and unnecessary administration fees;
• If you have minor children, you will not have the opportunity to express your choice of a guardian;
• The settlement process is more likely to be drawn out and your family to undergo financial hardship;
• Your business may be ruined by lack of any formal instructions on your part;
• There will be no donations to your favourite charities.  

Where do I start?

One – a list of all your property, including:

• Real estate
• Personal effects
• Other property — Cash, bank accounts, securities, etc.

Not all of your property will pass under your will. Life insurance, jointly held property, and survivor benefits of pension and other retirement plans will pass by contract or operation of law upon your death.

Two – Beneficiaries

Next, make a list of those you wish to remember in your will. You will want to provide for your dependents first, but here is your chance to be creative. You can give a work of art to a favourite aunt, honour a dear friend or arrange a memorial fund with the charity of your choice.

Three – An executor and an alternate

Your will names an executor or executors. It is the legal duty of the executor to carry out the terms of the will. Your spouse, relative, a friend or a trust company or a combination may be named, but choose with great care. The role may be quite complex. Your executor has broad powers to act, especially if you hold assets which need special handling such as a small business or certain property.

Choose a willing person who is  younger than you and who is up to this onerous task. Also, they are entitled to reasonable compensation.

Four – Drafting your will

If your estate is modest, your will should be simple and may involve only a modest expense to draft. There are several procedures.

Your lawyer or notary

Your lawyer or notary will draft your will in language so precise that there will be no doubt as to your intentions.

A trust company

Most trust companies in Canada can prepare your will. You should ask about the charges for preparing the will and the administration of estate assets.

You may draft your own will

A will prepared in your own hand is called a holograph will. Not all provinces recognize them as valid. Questions may arise as to your real intent and your estate could be tied up in court for many months.

Five – Execution of your will

Actual signing and witnessing is critical to the ultimate validity of the will and requirements differ from province to province. Don’t do it on your own. Consult your lawyer.

Witnesses

• Once your will has been drafted, you and your two witnesses will sign the document in each other’s presence.
• They should not be beneficiaries named in the will nor their spouses.
• As one or both may be called upon to give evidence as to the execution of your will, they should be residents of Canada and it is recommended that they be younger in age than you.
• In addition, a document required for the “probate” of the will (called an affidavit of execution) should be signed and sworn by one of the witnesses shortly after the will is signed.

Six – A regular review

Once you have drafted your will, don’t let it get outdated. A will drafted a few years ago reflects your thinking and lifestyle of that time. Consider possible changes to:

• Tax laws
• Family circumstances
• Your investments
• Your wishes

Major changes may necessitate the drafting of a new will; minor changes, however, can be made quite simply by adding a properly drafted and executed codicil which retains all the provisions of your existing will except those modified by this addition.

Don’t hide your will

Tell your executor and family where the original will is kept. Keep a copy of your will with your other important papers and file the original with your lawyer or trust company.

What you need to know about taxes

At present, there are no estate taxes or succession duties in Canada. But death taxes have not disappeared! Income tax on capital gains means the tax burden on your estate may be quite onerous. You can defer tax by passing your appreciated assets to your spouse through your will. You and your spouse must, however, be Canadian residents at your time of death. This allows the tax to be deferred, but not eliminated. Taxes will be due upon the sale of assets or the death of your spouse.

Charitable gifts by will

There are many causes and charitable organizations which are important to you. Often a significant gift to them is not possible in life, but a charitable bequest could allow you to make a major contribution.

Through a charitable bequest you can:

• reflect your own life values;
• provide a lasting expression of your life;
• pay tribute to a parent or a spouse;
• establish a memorial fund in the name of a loved one;
• provide future ongoing support for charities of your choice.

Types of Gifts

Specific gift

A bequest of a specific dollar amount or a gift of an identifiable piece of property.

Contingent gift

A gift which takes effect only in the event of the prior death of other named beneficiaries.

Residual gift

A gift of the balance or part of the balance of your estate after other specific gifts have been fulfilled. Naming a charity as a residual beneficiary would remove the possibility that your estate might go to the province should your other beneficiaries not survive you.

Charitable Remainder Trust

A trust established through your will by which named beneficiaries receive income for life. Upon the death of the beneficiaries, all or part of the capital would go to a charity.

A charitable bequest can save taxes

In the year of your death, Canada Revenue  Agency allows you to give charitable gifts of up to 100% of your estate’s net income for the year in question. Any excess can be carried back one year to save on that year’s taxes (also up to 100% of your net income).

A varying but substantial portion of every $100 contributed to a charity is saved from the combined federal and provincial taxes owed by your estate. A charitable gift is a highly recommended tax saving strategy to offset taxes arising from capital gains.

Lifetime giving - a consideration

You may wish to institute a long-range program of lifetime giving, combined with a bequest in your will. Perhaps you have an enduring interest in some specific aspect of your favourite charity. If your charity approves of your program, you can support your area of interest now by a yearly cash donation and endow it in perpetuity through a gift in your will.

How do I make a gift?  Sample wording

If you’re contemplating a change to your will, or if you are about to have a will drafted, you can make a gift by adding something similar to the below:

I give to [accurate legal name of the charity and current address] the sum of $ ____ [or % share of my estate] to be used for its general purposes.

You should also deal with the possibility that at the time of your death the charity is no longer in existence or has changed its purposes. Your lawyer can help you deal with this. Don’t forget — the easiest and least expensive way to include a charitable gift is to add a codicil to your will.

Your Gift

Consider your gift to a charity as an investment in the future. Like other investments, it should bring you the greatest possible satisfaction. We would welcome the opportunity to work with you to develop a gift which is meaningful to you.

A Final Word

The items contained herein have been reviewed by expert financial and legal counsel and are believed to be accurate interpretations of federal tax law. You should be sure, however, to consult with your own legal advisors about the applicability to your situation.  

The information presented here is a general overview and is not a substitute for professional advice. The authors and editors are not responsible for the results of any actions taken on the basis of information presented here, nor for any errors or omissions.

For more information please contact us by calling us at 519-837-6422 or by email at foundation@gghorg.ca