When Should You Review Your Will or Estate Plan?
Nine Triggering Events
We all know the importance of regular health checkups with our doctor or regular car maintenance check-ups with our mechanic but when’s the last time you took a look at your Will or estate plan? Is it due for a checkup? Have you experienced any life changes recently that require an update to your Will or estate plan? Most legal professionals recommend reviewing your estate plan every 3-5 years or any time you experience a major life event. A life event refers to any significant change in your life such as marriage, divorce, birth of a child, death of a spouse or changes to your financial position, to name a few.
Entering a New Relationship - In many jurisdictions, marriage cancels any Will prepared by either spouse prior to the union, unless the Will is made in contemplation of marriage. As well, many couples wish to appoint their new spouse or common-law partner as the beneficiary of their estate. For these reasons, your Will and estate plans may need to be updated once you get married or enter a new common-law relationship. In addition to updating your Will, you may wish to consider changing the ownership structure of your holdings, such as bank and/or investment accounts or real estate.
A common misconception is that your assets will automatically pass to your surviving spouse or common-law partner in the event of your death. In general, if you have not properly documented your wishes with respect to how you wish your estate assets to be distributed on your death through a valid Will or beneficiary designation, you may be considered to have died “intestate” with respect to those assets. This means those assets will be administered under the provincial intestate succession legislation for the province where you live. Under these intestacy rules, it is possible that your spouse or common-law partner may not receive all of your estate assets.
Raising a Family - Reviewing and updating your Will and estate plan is essential not only on the birth of your first child but upon any new additions to your family. It should be a priority for every parent to appoint guardians in their Will for the care of their minor children, to address a situation where both parents pass away. Although choosing a guardian can be a very emotional decision, parents must consider the best interest of their children when making their choice.
Disability of a Beneficiary or Dependent - Parents of children with a disability may wish to make appropriate provisions in their Will and estate plan for that child. You may wish to review your Will and estate plan with a qualified legal advisor to determine how it might impact your disabled beneficiary’s eligibility for income and/or asset tested provincial disability benefits and make any changes if necessary. Rather than leaving your assets outright to your disabled beneficiary, you may wish to consider having your assets flow on death to an absolute discretionary trust created in your Will for the benefit of your disabled beneficiary. This type of trust is often known as a Henson Trust.
Divorce - It’s very important to know that unlike marriage which cancels any previous Wills in many provinces, separation and divorce do not cancel an existing Will. Generally, getting divorced will revoke any gifts in the Will left to the spouse and any appointment as executor (unless a contrary intention is expressed in the Will) and your Will will be construed as though your former spouse predeceased you. In some provinces, your spouse or common-law partner may be disinherited from your Will if you are separated from them for a certain time period. In other provinces, separation has no impact on any gift left to your spouse or common-law partner or appointment as executor. As well, divorce or separation may have no impact on your beneficiary designations on registered plans and insurance policies.
Starting, Buying or Selling a Business - If you sell a business that you’ve included in your Will, it’s time for an update. Similarly, if you are buying or starting a business, you should review your estate plan to ensure it covers both your personal and business assets. This includes asking yourself who will step in as your successor if something happens to you. If you are a co-owner of a business, will your co-owners buy your shares or interest in the business should you become incapacitated or die? How will this purchase be funded?
Retirement - Your goals for, and needs from, your estate plan may change as you prepare for retirement depending on your personal situation as well as that of your family members. This presents another good opportunity to review your estate plan and Will to ensure they both meet your requirements and wishes. Is everything up-to-date?
Death of a Life Partner - Usually the death of a spouse or common-law partner may also necessitate an update to your own Will and estate planning tools. If your late spouse or common-law partner is named as the executor of your Will, beneficiary of your estate or any life insurance, retirement or pension plans, these documents may need to be revised or updated if you have no alternate beneficiaries named. If you have minor children, you should also review your choice of guardian.
Death of an Executor or Beneficiary - If your executor dies you may wish to change your Will to ensure that you still have a primary and alternate executor. Also of note, if your executor moves out of the province in which you reside or moves out of Canada, you may wish to name a new executor. Similarly, if one or more of your beneficiaries dies, you may want to update your Will and any other documents with new primary and alternate beneficiaries, as necessary, for your entire estate.
Acquisition of Foreign Property - There are a number of considerations when purchasing foreign property and the resulting consequences to your estate. For instance, you need to determine if your Canadian Will and POA are valid in the jurisdiction where your property is located. You may need a second Will and/or POA.
In general, mid-life is a good time to revisit your Will and estate plan. Consider how your family would carry on financially should you die, become badly injured or too ill to make decisions.
Susan Gottlieb is Vice President and Wealth Advisor with RBC Dominion Securities Inc. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. (firstname.lastname@example.org)