One key advantage that we have yet to touch upon relates to taxes and estate planning. Where a person dies intestate, if the deceased did not hold his or assets jointly with another person then it is likely that a Certificate of Appointment of Estate Trustee Without a Will will have to be issued. In such instance, Estate Administration Tax (more commonly referred to as “probate fees”) will be payable on the deceased’s estate at the time that the application for appointment is submitted to the court. A Will, on the other hand, can be used to avoid the likelihood that a Certificate of Appointment of Estate Trustee With a Will will be required and, if required, a Will can reduce the amount of probate fees payable on the deceased’s estate (more on this in later blog entries).
A final important benefit that should be kept in mind has to do with married beneficiaries. The Family Law Act, R.S.O. 1990, c. F.3, provides that income from property that is inherited by a married beneficiary can be protected from a claim by the beneficiary’s spouse on separation or divorce, but only if the Will by which the married beneficiary inherited such property expressly states that the income is to be protected. Generally, Wills are drafted to provide that any income, including any increase in the value of the inheritance (i.e. capital gains), will be excluded from the spouse’s net family property.
To illustrate the importance of this provision, consider the example of a testator who left the family cottage to his married daughter and included in his Will the provision that income on the cottage is to be protected. Let’s say that at the time the daughter inherited the cottage it had a value of $200,000. It is now ten years later and the daughter is unfortunately going through a difficult divorce and the cottage has a current value of $400,000. Under this scenario, not only would the first $200,000 (the value of the cottage at the time of inheritance) be excluded from calculating the daughter’s net family property, but the second $200,000 (the increase in the cottage’s value since the time of inheritance) would also be excluded from the calculation. If her father’s Will had not contained the express provision, or if he had died intestate, only the original value of the cottage would have been protected. As this example illustrates, proper estate planning (which invariably includes a carefully drafted Will) can have a profound impact on the lives of those closest to you.
Thanks for reading “The Estates Nutshell” – questions and comments are very welcome at estates@cklegal.ca.