Sherman Law LLP

 

 

 

Estate Planning/ Wills and Power of Attorney

 

What is a Will and Power of Attorney?

 

A Will is a legal document that sets out your intentions and how you wish your assets to be distributed after your death. Your Will appoints a person or persons knows as the executor or estate trustee who will administer your estate according to governing laws and can include provisions for your children or dependents including the appointment of guardians. Your Will also states those who may be entitled to receive your property upon death, who are known as heirs or beneficiaries.

 

A Power of Attorney is a legal document in which you give someone you trust, which are referred to in the documentation as an "attorney", the right to make decisions for you if something happens and you are no longer able to look after matters on your own. A Power of Attorney can deal with your assets and finances as well as your health care, housing, and aspects of your personal life.

 

Both a Will and Power of Attorney are essential parts of a comprehensive estate plan. Working with an experienced and skilled lawyer at Sherman Law LLP is the first step in protecting your legacy and reaching your estate planning goals. 

  Circular diagram of estate planning

 

 

 

 

 

What happens if you die without a Will?

 

If you die without having a valid Will, your estate will be dealt with as an “intestacy”, meaning an estate without a Will. In these circumstances, the court will be required to appoint a person or persons to administer and distribute the estate according to intestacy laws. The resulting distribution can often be contrary to your wishes or intentions, and can have unintended consequences. This legal process often costs more than a basic Will prepared by our firm.

 

Did you know that Ontario law dictates that a surviving spouse is only entitled for up to $200,000.00 of the estate, if the deceased leaves an issue (child) at the time of their death? 

 

In these situations, the remainder of the estate is divided equally between the spouse and the issue (child), or one-third for the spouse if there are two issue (children). Having a well-drafted Will can minimize the unnecessary costs and delays of administering your estate, decreasing or postponing taxes, and addressing financial issues that your family might otherwise have to deal with on your behalf.

 

Are common-law partners treated the same as married spouses?

 

Common-law partners are not automatically treated the same as married spouses under Ontario law. The law indicates that if a common-law partner dies without a Will, the surviving partner is omitted from receiving any part of the estate. This fact could result in a common-law partner being left with nothing at the time of the other partner’s death. In order to avoid these circumstances, common-law partners must make adequate provisions in their Will to provide for the other surviving partner. We can assist you in drafting a Will that meets all of your goals while providing for your common-law partner.

 

Why do you need Powers of Attorney?

 

A Power or Attorney is a document whereby you appoint another person you trust to act on your behalf to make decisions for you when you are no longer able to look after matters on your own. The person who is appointed is called the “attorney”, which in this context is similar to an agent. To sign a Power of Attorney, you must be considered mentally capable. The test for mentally capable can vary. It normally includes that you understand the need to choose someone with genuine concern for your welfare, and that there may be a need for that person to make personal care decisions for you. Other factors for determining mentally capable include that you are aware of your assets including what you own and what they are worth, you are are aware of your obligations to your dependants, and you understand the authority and power you are giving to the person holding the Power of Attorney. 

 

There are two types of Powers of Attorney documents that are used in Ontario:

 

  • Power of Attorney for Personal Care (also known as “a living Will”), which appoints a person that you trust to handle your health care needs in the event of your mental or physical incapacity. A Power of Attorney for Personal Care only comes into effect if and when you are not capable of making your own health care decisions by virtue of mental or physical incapacity.

 

  • Power of Attorney for Property (also known as “Continuing Power for Property”), which appoints a person that you trust to handle your financial affairs, including paying your bills, collecting money owned to you, maintaining or selling your house, and managing your investments. A Power of Attorney for Property can come into effect immediately or upon mental or physical incapacity. You should therefore be careful when signing a Power of Attorney for Property because it can come into effect on the date that you sign the document, and the named person can immediately start making decisions on your behalf.

 

Powers of Attorney are an important part of your estate planning. Some health care facilities and hospitals may provide a Power of Attorney for completion, but they are not as detailed and complete as the documentation we assist you in preparing as part of your comprehensive estate planning. We suggest that all of our clients have Powers of Attorney prepared. In circumstances where a person does not prepare and execute a Power of Attorney and incapacity should occur, the Office of the Public Guardian and Trustee (OPGT) would assume responsibility for the management of the estate. It is both time-consuming and expensive for family members to assume responsibility once a court has appointed the OPGT.

 

When should you update your Will and Powers of Attorney?

 

We suggest that a lawyer at our firm should review your estate planning every five years to ensure that your wishes are observed and that your estate plan properly meets your current needs and that there have been no changes to your assets or the governing law.

 

Illness, marriage, starting a family, the birth of children, changes in financial circumstances, and separation/divorce are all events in life where you should consider updating your estate planning. 

 

Did you know that if you should marry or separate after your last Will is executed, it would be in most cases automatically revoke?

 

The following are circumstances that might occur in your life requiring you to notify our firm so that we can assist you in making necessary amendments to your estate planning:

 

  • If you change your name, or anyone mentioned in your estate planning changes their name;
  • If an estate trustee becomes unsuitable to act due to age, poor health, or other issues resulting in an inability to act;
  • If you have specifically bequeathed any property which you sell or which changes its nature;
  • If you become divorced, remarry, or decide to adopt a child;
  • If you wish at any time to revoke or alter any part of your Will;
  • If your estate increases significantly; and,
  • Your Powers of Attorney documents should be reviewed in the event that your appointed attorney dies or is unable or unwilling to continue to act on your behalf.
 

What is probate?

 

At the time of your death, there is generally a requirement as part of estate administration that your last Will and Testament be legally approved by the court under Ontario law. This process also confirms the appointment of your executor. Probate is the court process that gives the executor and estate trustee of a Will the authority to act on behalf of the deceased person. However, not all last Wills and Testaments have to go through the probate process. This determination will depend on the nature of the assets, but as a practical matter, most estates end up going through this process.

 

In Ontario, the estate administration tax, formerly referred to as “probate fees”, is calculated on the amount of assets in the Will that are subject to probate. In Ontario, the first $50,000 of an estate pays $5.00 for every $1,000 (0.5 per cent) and anything more than $50,000 will pay $15.00 for every $1,000 (1.5 per cent). An estate less than $1,000 do not pay estate administration tax.

 

For example, a $1,000,000 estate would pay approximately $14,500 in estate administration tax. A comprehensive estate plan can minimize the amount of estate administration tax payable by an estate.

 

How can you minimize probate fees?

 

Many clients will focus on the desire to avoid probate without understanding some of the implications of so doing. Real estate including primary residences, bank accounts, investments, cars, boats, business interests, and other tangible goods such as jewellery and valuable art collections are all subject to estate administration tax.

 

You can minimize probate fees on property that has a joint account holder with a right of survivorship, or accounts with a named beneficiary. Assets such as your tax-free savings account (TFSA), your registered retirement savings plan (RRSP), registered retirement income fund (RRIF), and locked in retirement account (LIRA) are not subject to estate administration tax if you designate beneficiaries under those plans. In addition, the death benefits of any life insurance policy will avoid probate fees if you name beneficiaries under those policies. By designating beneficiaries, other than your estate, these assets will fall outside of your estate and pass directly to the named beneficiaries upon your death.

 

Why should you not make your entire assets joint with your children or other beneficiaries?

 

Many clients will ask our lawyers why they should not make their entire assets joint with their children or other beneficiaries. Normally, it is a good idea for spouses to hold property jointly unless there is some other reason not to do so, such as protection from creditors and income splitting. However, in estate planning adding other people such as children to the title of property can have several unintended consequences.

 

First, the other party would become a 50 percent owner of the asset, and it is exposed to creditors and a spouse upon marriage breakdown. Second, there could be unwanted tax consequences. Adding a joint account holder to an investment account could trigger a capital gain depending of the nature of ownership, as Canada Revenue Agency (CRA) may deem that 50 percent of the account to have been sold. It is of utmost importance to ensure that a lawyer drafts the intention of the ownership structure properly. Working with an experienced and highly skilled lawyer at Sherman Law LLP in this regard could save your thousands of dollars in unforeseen capital gains.

 

Is it possible to have multiple Wills as part of your estate planning?

 

Yes - a 1998 Ontario court decision, commonly referred to as the Granovsky case, made it possible to establish multiple Wills in Ontario – one for those assets that must go through probate, which we call the Public Will and one for any non-probatable assets, which we call the Private Will. 

 

For example, the share of a privately held company can avoid probate and be dealt with in a Private Will. At the time of your death, only the Public Will dealing with the probatable assets will be filed for probate. It is therefore critical that your Wills be drafted as part of a comprehensive estate plan so that one document does not revoke the other.

 

If you believe that you would benefit from having multiple Wills, you should speak to a lawyer at our firm to ensure that your estate planning goals are drafted to protect your legacy and address any related business and succession planning concerns. 

 

 

 

 

Do you want to learn more about Wills and Powers of Attorney?

 

For over 40 years, clients have trusted in our ability to explain how Wills and Powers of Attorney are part of a comprehensive estate planning. We are confident that you will appreciate our professional and personalized service. We invite you to browse our website and read the positive things others have to say about us. To benefit from our knowledge and experience with respect to your estate planning please contact 519-884-0034 or send us an email. Many of our clients are referred to us by former and current clients, as well as by lawyers, accountants, and financial advisors. We serve clients in Kitchener, Waterloo, Cambridge, Guelph and surrounding areas.

 


 

Connect with a lawyer in our firm with expertise in this area

 

Aubrey J.  Sherman

Aubrey J.  Sherman