CONSEQUENCES OF DYING WITHOUT A WILL
Dying without a will (AKA intestate) is far more common than you may expect. Over one-third of adult Canadians do not have a will. This is because people are naturally reluctant to talk about, or prepare for, their own death. However, if you do not prepare a will, you will give up the right to direct how your property will be divided and who will administer your estate.
If you die without a will, provincial intestacy laws govern how your assets will be distributed. In most cases, this is not what you may have intended. While many people think that their spouse will automatically inherit all their assets if they die without a will, that is not the case. In most provinces, while your spouse will receive a preferential share of your estate, the balance of your estate is divided equally between your spouse and your children.
Even when hundreds of thousands of dollars aren’t on the line, dying without any official documentation can leave your loved ones confused and carrying a heavy burden.
An interesting example of this was illustrated in a newspaper publication-
Heinz Sommerfeld died in June 2017 at age 77 in a GTA nursing home, the lifelong bachelor — he had no children — left no instructions on how to distribute his wealth.
After working his entire adult life for Ontario’s Department of Highways, Sommerfeld left behind an estate valued at $800,000.
Sommerfeld did have a younger half-brother, but instead of going to his only surviving family member, his $800,000 estate was siphoned off by a Toronto police officer who filed a false affidavit claiming he was the beneficiary of Sommerfeld’s estate.
The case is still before the courts, and Sommerfeld’s younger brother has not only never received a dime, he’s now involved in a lengthy and difficult court case with no guarantee that he’ll ever recoup any of the money.
WHAT IS INTESTACY?
Intestacy is the condition of the estate of a person who dies without having in force a valid will or other binding declaration. Alternatively, this may also apply where a will or declaration has been made, but only applies to part of the estate; the remaining estate forms the “intestate estate”.
WHO IS AN INTESTATE?
Intestate refers to a person dying without a legal will.
WHO TAKES CARE OF YOUR ESTATE AFTER YOU DIE?
When a person dies without a will, usually a close relative must apply to the court to be appointed as the estate trustee. If there is a dispute as to who should be appointed the matter must be referred to a judge to determine the most appropriate person to act as estate trustee.
DUTIES OF THE ESTATE TRUSTEE:
The Estate Trustee must identify and locate all of the assets and liabilities of the estate and must ensure that liabilities of the estate including debts, funeral expenses, estate administration costs and taxes are paid. The balance left over after payment of these liabilities forms the assets available for distribution from the estate. The trustee is a fiduciary and must account for every asset.
NON-APPLICATION OF INTESTACY RULES TO SEPARATED SPOUSES:
The entitlement of a person’s spouse to any of the person’s property does not apply with respect to the spouse if the spouses are separated at the time of the person’s death.
A spouse is considered to be separated from the deceased person at the time of the person’s death if,
(a) before the person’s death,
(i) they lived separate and apart as a result of the breakdown of their marriage for a period of three years, if the period immediately preceded the death,
(ii) they entered into an agreement that is a valid separation agreement
(iii) a court made an order with respect to their rights and obligations in the settlement of their affairs arising from the breakdown of their marriage, or
(iv) a family arbitration award was made with respect to their rights and obligations in the settlement of their affairs arising from the breakdown of their marriage; and
(b) at the time of the person’s death, they were living separate and apart as a result of the breakdown of their marriage.
HOW DOES YOUR ESTATE DEVOLVE- SCENARIOS:
Intestacy where spouse and no issue
Where a person dies intestate in respect of property and is survived by a spouse and not survived by issue, the spouse is entitled to the property absolutely.
Preferential share of spouse
Where a person dies intestate in respect of property having a net value of not more than the preferential share and is survived by a spouse and issue, the spouse is entitled to the property absolutely.
Spouse and one child
Where a person dies intestate in respect of property and leaves a spouse and one child, the spouse is entitled to one-half of the residue of the property.
Spouse and two or more children
Where a person dies intestate in respect of property and leaves a spouse and more than one child, the spouse is entitled to one-third of the residue of the property.
Issue of predeceased children
Where a child has died leaving issue living at the date of the intestate’s death, the spouse’s share shall be the same as if the child had been living at that date.
Where a person dies intestate in respect of property and leaves no spouse or issue, the property shall be distributed between the parents of the deceased equally or, where there is only one parent surviving the deceased, to that parent absolutely.
Brothers and sisters
Where a person dies intestate in respect of property and there is no surviving spouse, issue or parent, the property shall be distributed among the surviving brothers and sisters of the intestate equally, and if any brother or sister predeceases the intestate, the share of the deceased brother or sister shall be distributed among his or her children equally.
Nephews and nieces
Where a person dies intestate in respect of property and there is no surviving spouse, issue, parent, brother or sister, the property shall be distributed among the nephews and nieces of the intestate equally without representation.
Next of kin
Where a person dies intestate in respect of property and there is no surviving spouse, issue, parent, brother, sister, nephew or niece, the property shall be distributed among the next of kin of equal degree of consanguinity to the intestate equally without representation.
Where a person dies intestate in respect of property and there is no surviving spouse, issue, parent, brother, sister, nephew, niece or next of kin, the property becomes the property of the Crown.
CONSEQUENCES OF DYING INTESTATE:
- You have left your grieving family completely confused.
- You did not name an Executor- Probate in Canada is simply the acceptance of your Will as your Last Will and Testament, and the appointment of your Executor as your personal representative. When you die, loved ones cannot just show up at a bank and ask for your money. They cannot even show up with a Will; the bank has no way of knowing whether the document in their hands is the valid Last Will and Testament, whether it was superseded by another Will, or whether it was written or signed by the testator. They do not have the skills, or the legal authority to make that determination.
The courts have to determine the authenticity of a Will, and accept the appointment of Executor. They will in turn give your Executor a “grant of administration” but in essence your Executor will receive a court issued document that appoints your Executor and gives them the authority to gather your assets and distribute them according to the instructions in the Will.
But without a Will, there may be no obvious candidate for this appointment. The general rule is that your closest relative has the right to be appointed as your personal representative.
- Your loved ones cannot get hold of your assets.
- You have not decided how your estate will be distributed.
- You did not name a guardian for your children or set up trusts for minor beneficiaries- If you have young children, maybe the most important part of your will is naming someone to be their guardian, in case both you and your children’s other parent die.
If something were to happen to both parents, the hope is that people will come forward and apply for the guardianship of the children. A judge will make the appointment.
Of course, the judge will know nothing about your family history, will not understand the family dynamics, shared values and interpersonal dynamics. The judge will appoint the person you name in your Will, unless there are serious reasons not to. If you end up dying intestate however, and haven’t named a guardian, the judge will have to choose someone without your input.
EVERYONE NEEDS A WILL
Contrary to popular misconception, wills are not just for people with lots of money.
A will does more than just lay out who gets your money when you’re gone. A well-thought-out estate plan also considers your overall goals and objectives, including charitable bequests, appoints executors who are willing and able to take on the responsibility of managing your estate, and names guardians for your minor children.
A will should be written to be good for the next few years, not just for today. It will need updating periodically when the legislation or your personal circumstances change, such as separation, divorce or remarriage. As with all things financial, it pays to do some planning.
A FEW IMPORTANT TAKE-AWAYS:
- A spouse does not automatically inherit all of your property. In fact, in most Canadian Provinces if you have a spouse and children, the chances are, your spouse will not be your sole beneficiary.
- Your children will inherit, but nobody, including your spouse can decide how everything will be divided between the children. And they will receive their inheritance at 18 or 19 years of age depending on the Province.
- The courts will appoint somebody to administer your estate and take care of your affairs. Your spouse or family members do not make that appointment, the courts do.
- Your family do not decide how your possessions will be distributed; the court appointed administrator will. And this may include selling off items that you wanted to be kept in the family.
- Nobody who is more deserving can receive more. In fact, there is no discretion involved at all. Your estate is distributed according to the established formula.
- The distribution of everything will be delayed, as your loved ones will have to wait for their time with the courts.
- With nothing written to the contrary, people will start helping themselves creating further confusion and mess for everyone involved.