Will Planning – Will DIY 2/7

This may seem redundant, but it is crucial to address at the outset. The simplest, most direct, and effective way to invalidate a will is by proving that the testator lacked testamentary capacity or was under duress at the time of making the will.

It is important to note that “testamentary capacity” refers solely to the clarity, maturity, and logical coherence of the testator’s mind. It has nothing to do with the testator’s physical health or mobility. More precisely, testamentary capacity is a legal issue, not a medical one.

On one hand, one of the most difficult tasks for an Executor is to locate all of the assets of the deceased and determine who to contact when the Will is being executed, following this logic, it seems the Will should include a detailed list of all assets. However, on the other hand, it is actually a mistake to list all of your assets in the Will. For instance, if you are leaving your entire estate to one person, such as a spouse, there is no need to itemize all your assets. Doing so would require you to update your Will every time an asset changes, which means having the document re-signed and witnessed each time, just like the original Will.

That being said, a testator should have the following information, supported by accessible documents, to create a detailed list of what his property consists of.

• Assets
  • Cash investments, chequing, saving, TFSA, GIC accounts, etc. 
  • Safety deposit box
  • Stocks shares and funds
  • Real estate
  • Insurance
  • RRSP, RRIF, RESP, etc.
• Liabilities
  • Tax owed
  • Real estate mortgage
  • Other loans
  • Private loans
  • Credit cards

From another perspective, a testator should fundamentally understand the following aspects of his assets:

1. Real Estate Valuation

   • Surprisingly, many testators do not know the current market value of their properties. Even though the value of a property may change significantly by the time the testator passes away, it is essential to have an understanding of its worth at the time the will is drafted.

2. Location of Assets

   • Does the testator’s property extend beyond Ontario? For real estate and personal property in Ontario, Ontario law governs. For personal property outside Ontario, Ontario law still applies, subject to relevant conflict of laws principles or foreign jurisdictional requirements. For real estate outside Ontario, local laws apply, taking into account international law principles and recognition of Ontario probate decisions.

3. Ownership Details

   • Clarify the ownership structure of real estate and other assets—whether they are solely owned or held in joint ownership or tenancy-in-common.

The Executor will use your Will to speak on your behalf as if you were alive. This is a responsibility that you would not want to give to just anyone.

Typically, your Executor will be a family member or close friend. Most commonly, it is a spouse or a child. Most importantly, the Executor must be a person whom you trust completely. If you do not know anybody who has all of the required qualities, then an independent professional will do the job for a fee.

Do not choose somebody who is too old, unstable or ill, nor should you appoint a minor, an incompetent person or a convicted criminal. 

Select a person who is diligent and acts with integrity. Otherwise, they may fail to follow appropriate accounting practices. For example, they might not file accurate tax returns, might fal to pay off debts, or might make poor investment decisions. A poor Executor might not distribute your property in a timely manner or according to your wishes. In extreme circumstances, the Executor might actually embezzle funds for themselves or to benefit favoured beneficiaries. 

Also, you could name an alternate Executor in case any of your first choice Executors cannot, or do not want to serve. If you have named more than one Executor, your alternate will replace the Executor who cannot serve. If you have only named one Executor, then the alternate will simply replace them as the sole Executor.

If you do not name an alternate Executor and your first choice Executor cannot serve, then a person will be appointed by the courts to distribute your estate.

In Ontario, a testator is generally free to leave their assets to whomever they wish, provided it is legal. However, there are laws that limit this freedom. In other words, a testator may believe they can freely distribute their assets, but in reality, there are two significant legal constraints.

1. Dependant Support Claims

For example, a testator might think:

• “I have a common-law partner of 30 years, but I don’t want to leave her anything since she’ll be fine on her own.”

This testator would be overlooking the legal implications of Part V of the Succession Law Reform Act (SLRA) and the landmark case Cummings v. Cummings [2004].

Even if the testator excludes their common-law partner from the will, the partner can still make a claim if they meet the following conditions:

1. They are in a qualifying relationship with the deceased (e.g., spouse, common-law partner, child, parent).
2. The deceased provided support immediately before their death.
3. They were not left adequate provisions in the will.

The term “adequate provisions” was expanded by Cummings v. Cummings, which introduced moral considerations alongside the claimant’s budgetary needs. This case allowed courts to consider the equitable distribution of family wealth, not just financial necessity.

2. Matrimonial Property Claims

Changes to the Family Law Act (FLA) in 1986 significantly altered the division of property between spouses. The distinction between family and non-family assets was abolished, and the division of value replaced the transfer of assets in kind. This law applies even when a marriage ends due to death.

A surviving spouse can choose between:

1. Entitlement under the will (which could range from a minimal amount to substantial sums), OR
2. An equalization payment, calculated similarly to net family property division in divorce.

If a testator leaves less than half of the total marital assets to their spouse, they must consider the risk of an equalization claim. The best way to limit this risk is through a marriage contract or cohabitation agreement, supported by independent legal advice and full financial disclosure.

Additionally, testators can take self-help measures to minimize exposure, such as maximizing exclusions from net family property or reducing their net worth on the valuation date. Despite this, caution must be exercised, as inter vivos transfers made to reduce an equalization claim could be seen as fraudulent conveyance, as established in Stone v. Stone [2001]. 

A critical reason why will and estate planning must carefully consider the Family Law Act (FLA) is to protect the testator’s gifts to their children from potential equalization claims by a current or future son-in-law or daughter-in-law. Several strategies can be considered: 

1. Outright Gift – Gifts and inheritances received by a spouse during marriage are excluded from the recipient’s Net Family Property (NFP). Income generated from these gifts or inheritances is also excluded. However, if the gift is given before marriage, the value of the gift at the time of marriage can be deducted when calculating the child’s NFP later on
2. Discretionary Gift – To provide greater protection for a child, a testator may establish a discretionary testamentary trust for the child instead of making an outright gift.
3. Debt Forgiveness – If parents intend to forgive a debt owed by their child, it will only benefit the child if the debt is forgiven before the child’s marriage.

Additional Considerations:

1. A matrimonial home is the exception to the aforementioned rules. No matter how carefully the testator plans, a future son-in-law or daughter-in-law can still claim half of the matrimonial home’s ownership.

2. Although the value of a gift or inheritance received during marriage is excluded from NFP, it may still be vulnerable to an equalization claim, meaning the gift’s value could be used to satisfy such a claim.

1. It is preferable to appoint a single estate trustee. If a second trustee is necessary, they should act as an alternate, only stepping in if the primary trustee is deceased or incapacitated.
2. For large or complex estates, multiple trustees may be appropriate, but decisions should be made by majority vote rather than requiring unanimous consent.
3. A testator, is called a “grantor” when he considers to complete his estate planning with a Power of Attorney (POA) for his property. A “POA for property” allows the grantor to appoint individual(s) to manage or administer his property and financial affairs on his behalf if he is unable to do so. The purpose of this document is to cover situations where a Will does not apply (eg. he is still alive) such as where he is incapacitated or in a coma and cannot handle these matters.
4. A testator, is also a “grantor” when he considers to complete his estate planning with a Power of Attorney (POA) for his health care., this is also called a “Living Will” sometimes. A “POA for health care” allows the grantor to express his wishes and directions regarding his health care and to appoint individual(s) to act on his behalf for health care matters in the event that he is unable to do so. The purpose of this document is to cover situations where a Will does not apply (eg. he is still alive) such as where he is incapacitated or in a coma and cannot handle these matters.
5. At last, don’t forget the pet(s)! A testator may also want to create his Pet Will and ensure that his beloved pets are looked after by a trusted friend in the event that he is incapacitated or pass away.