Weigh options when writing a will

Any person can be named as a beneficiary but there are obligations to spouses and financial dependents to consider

Planning a will is not something to take lightly, especially when deciding how to allocate assets.

Many options must be weighed, like which child gets what and how assets and land should be divided, but for some testators who don’t have large families or children to give their assets to, what are some other options?

If a person does not have a will, inheritance follows the laws of intestacy, says Stuart Busse of Busse Law in Biggar, Sask. It is a general misconception that if a testator doesn’t have a will that money will go solely to the government. What does happen is that the inheritance will follow a general order until a relative is found to inherit the assets, Busse says, which can vary slightly from province to province.

The general order is spouse first, followed by children and grandchildren. A testator who dies without children follows the line down from their parents to siblings to nieces and nephews and great nieces and nephews. The line will continue down through to grandparents and even great-grandparents until a beneficiary is found.

However, with a well-planned will, everyone has the power to direct where their assets will go, instead of relying on the law of intestacy with no control over who does or doesn’t inherit.

“The flip side of that coin is, if you don’t leave a will, no one will know what you actually wanted. And for the most part, for family members, and trust companies alike, their primary interest in administering your estate is ensuring that they fulfill your wishes,” says Isabelle Cadotte, estate and trust consultant at Scotia Wealth Management in Calgary.

Cadotte has seen many variations of how assets are distributed and heard about unique cases.

There is no limit on where the money can go, she says. Any person can be named as a beneficiary but there are obligations to spouses and financial dependents that testators must consider. A lawyer should always be consulted on who the person does or doesn’t want to be included as a beneficiary or who has to be taken care of in a will. A person’s spouse should be the first point of discussion, says Cadotte.

“That’s always the first kind of person to look at is if I do have a spouse or a partner, I want to ensure that they’re looked at and looked after to some extent,” says Cadotte.

If children are not an option as a beneficiary, leaving an estate to parents or older relatives can be tricky since the statistical likelihood of parents outliving their children is low. Same with beneficiaries who are around the same age. Life and death are so uncertain that having back-up beneficiaries can also be a wise decision, says Cadotte.

This can be done with a gift over provision, “an alternate beneficiary to receive a share of the estate in the event the primary beneficiary had predeceased the testator,” says Cadotte.

Appointing a gift over beneficiary does not take away the ownership from initial beneficiaries but allows a second option if that beneficiary passes away before the testator. This can save a lot of trouble for the executor.

When choosing younger beneficiaries, there are options for giving to children who are under the age of majority or who are over the majority age but need some extra provisions to keep their money safe. Just like a person giving to their adult children with a mental disability or addiction issues, Cadotte says giving to nieces, nephews, or friends in trust is also a possibility.

“Specialized trusts for beneficiaries with a disability or money management issues can help ensure their inheritance is kept safe and the beneficiary has access to a source of funds for a rainy day or to meet their financial needs. The trust does not have to be set up immediately but for it to take effect when the time comes, appropriate wording should be included in the will.”

These terms can be indicated in the will to put a trustee in charge of the funds for the beneficiary, both to invest the money in their name or to distribute the funds to the beneficiary over a set amount of time. The trustee does not have to be the executor of the will and another person can be appointed, but it must be someone who the testator trusts and someone who can handle the trust for its entire duration. No matter the situation, there is some flexibility, says Cadotte.

This is not just limited to children or adults with a disability. Even if a beneficiary has money issues and that level of trust is not there, Cadotte says it is all about knowing your options and having that honest conversation.

For the legality of dying, an open conversation during planning is key to avoiding problems and fighting between beneficiaries.

For people who have few family or friend options for beneficiaries, there are other options like donating parts of their estate to charities that are special to them or even leaving land to conservation and educational organizations.

Cadotte recalls one farming couple who donated their farm to an agricultural college. Again, the bequest was for after both spouses had passed away and neither were relying on the land for income. Following both their deaths, they wanted to provide that land for educational purposes and to honour their family’s long-standing relationship to the educational institution.

“The land is going to continue to appreciate in value… there’s a lot of value tied up in that land, not just monetary, but also just for what it is. And there’s organizations that could benefit from that.”

As long the cause is legal, there is no limit of who to give money to, says Busse.

“The bequest will fail if you’re sponsoring a terrorist organization or a criminal organization or things of that nature, but as long as the beneficiary that you’re intending to donate to is conducting legal activity, it doesn’t really matter.”

For farmers who fear what will happen to their land following their death, there are ways to protect their land from development by speaking with provincial organizations. A quick search online will help anyone find the right organization in their area when the land may have some environmental or ecological value.

“Looking at creating some sort of conservation easement or protection around ecologically sensitive land is an option,” says Cadotte.

Not only will testators find a solution but they could see tax benefits in donating their assets.

“Charitable donation could significantly offset the taxable portion of the estate so there’s some interesting kind of tax opportunities there, and then it, of course, gives you the opportunity to give back to your community.”

Donating part of the estate to a charity is tax deductible, says Busse, which can help stretch an testator’s assets even further.

“If there’s tax payable by the estate and you donate it to a registered charity, you can save tax money to have more money to give to other charities,” he says.

While there are some nuances from province to province regarding estate planning, taxes, and fees, planning your will early and talking with a professional can solve many tough problems.

This article should not be taken as tax or legal advice and readers should consult with their lawyer, accountant and other professionals before implementing any of the approaches discussed.

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