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Wealth Transfer Strategy 5
Preparing a will isn’t something most people look forward to. Yet there are several good reasons why you shouldn’t put off getting your will prepared — especially when you consider how little it costs and the benefits that come with it.
Having a will helps facilitate the administration of your estate and can help you save taxes. A will communicates your intentions and can allow you — and not the government — to determine how your assets will be distributed upon your death. You put a lot of effort into acquiring wealth, so doesn’t it make sense to make sure your interests are preserved after you pass away?
Will planning in Quebec
In the absence of a proper will, a Quebec resident’s estate will be settled in accordance with the Civil Code of Quebec. This is often not the wisest choice. For instance, if you leave behind a common-law spouse and minor children, the spouse would be entitled to nothing under the Quebec Civil Code. A situation like this could lead to countless difficulties in raising these children to adulthood. Many other examples could be given, all with a common factor: they’re preventable with a valid will.
What happens if you don’t have a will?
Beside the fact that your assets won’t be transferred in accordance with your wishes, there are other consequences of dying without a will:
- Transfer of your assets may take more time and be more costly.
- Taking financial care of dependent children or relatives may be more difficult or even impossible.
- Your spouse may end up not being well protected.
- Your minor children could have access to their share of your estate at the age of 18, something they may not be able to handle at that life stage.
- There are preventable tax liabilities.
- The liquidator will be named by your heirs or the court if they can’t agree, not the person you would’ve selected.
- It may force the sale of assets at the wrong time.
What are your options in Quebec?
In Quebec, three different forms of wills are available:
- Holograph wills are handwritten and signed by the testator.
- Wills signed before witnesses can be printed but must be signed by the testator in the presence of two witnesses. It can be prepared by a third party or by the testator.
- Notarial wills are drafted by a Quebec notary and signed by the testator before a witness and the notary.
There’s a definite advantage to using a notarial will in Quebec. It doesn’t have to be verified by the Superior Court like the two other forms, saving time and cost.
Professional advice on wills
Mistakes can easily be made in drafting a will. Estate and tax planning are complex and the help of a specialist is highly recommended to facilitate the settlement of the estate and to help minimize tax liability.
How to prepare yourself?
Before meeting with your legal advisor, prepare a summary balance sheet that includes your assets and liabilities and your life insurance coverage. You should also be prepared to answer some questions:
- Who do you want to name as legatees of your estate?
- Who’s going to serve as liquidator (and/or trustee) and what will be the extent of their mandate and powers? Make sure that they’re willing, and if not, be prepared with a back-up.
- What are your instructions for your funeral arrangements?
- Do you want to leave a particular legacy to friends, relatives, or charities? Often, personal belongings are bequeathed in this fashion.
- Who could act as guardian or tutor for your minor children?
- Who are going to be your primary legatees? Also, consider naming secondary legatees should your primary legatees not survive you.
- Do you want your children to receive their legacy in a lump sum, over a certain period of time, or at a certain age, or do you want to set up a trust for their benefit?
- Do you want certain provisions to deal with your business assets?
- Do you want to discuss the feasibility of setting up trusts for legal or tax purposes?
How often should you update your will?
A will should be reviewed every time a significant life event occurs; for instance, the death of a legatee or a liquidator, a divorce (yours or that of a legatee), a birth, or a change in your financial situation. Also, a will should be reviewed whenever there are changes to tax, family, or other applicable laws that could affect your estate-planning goals.
As a rule of thumb, every five years or so, you should read through your will to see if it’s still relevant and in line with your wishes. At that time, you may also want to meet and discuss the matter with your legal advisor.
A will protects you and your family
A will is the foundation of an estate plan. The goal of having a properly drafted will is to make sure your assets will be distributed according to your wishes and that your loved ones will be properly provided for in a tax-efficient manner. By creating a will, you can avoid unnecessary costs, delays, and the undesirable results of intestacy, while gaining the ability to choose the liquidator of your estate and the tutors of your children. When you consider that most wills can be prepared for a few hundred dollars and take into account the potential consequences of not having one, it’s clear that everyone should have a will.
There may be certain situations in which a will is properly drafted but may be affected by pre-existing alimony obligations, or a residual claim under a marriage contract, or family patrimony. If successful, this may change the distribution of assets set out by the will. However, your legal advisor should be able to help you evaluate the impact on your plan and guide you in limiting unwanted results.
Investors who want to:
- Make sure their assets are distributed according to their wishes
- Facilitate the administration of their estate and minimize taxes
- Select the liquidators of their estate and tutors of their children
- Set out specific instructions on matters such as their funeral arrangements.
If this applies to you, and:
- You don’t have a will, have your legal advisor prepare one.
- You have a will, review it regularly to make sure it still reflects your wishes and amend or update if needed.
The commentary in this publication is for general information only and should not be considered investment or tax advice. Individuals should consult with their professional advisors to ensure that any information provided is applicable and appropriate to their specific situation. Manulife, Stylized M Design, and Manulife Investment Management & Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and its affiliates under license.