Do you have a will? Do you know someone who keeps saying they need a will, but for whatever reason, keeps putting it off?
Dying without a will can cause major headaches – and often, major expenses – for your family members, who will more than likely already be going through a difficult time dealing with their grief.
In March of 2015, one of my family members died of a sudden heart attack, leaving behind his wife and a minor child. Already upset and dealing with the sudden death of a loved one, our family has also had to endure the complicated, costly and time-consuming process of dealing with the Ontario government, which governs the distribution of estates where there is no will in place.
Firstly, we discovered, one has to apply for a "Certificate of Appointment of Estate Trustee without a Will" (often the spouse, which was the case here). She (the Trustee) then has 90 days to file an "Estate Information Return". This is a long information return listing the fair market value of the assets in the estate (such as real estate in Ontario, bank accounts, vehicles, and investments at the date of death). Because the death was so sudden and their record-keeping was not easy to follow, it was quite a challenge to complete the return within the 90-day deadline.
The Ministry then calculates probate tax based on the fair value of the estate. Probate tax varies province to province. In Ontario, it is calculated at $250 for the first $50,000 ($5 for each $1,000) plus 1.5% of the value of estate assets over $50,000. In this case, the probate fees ended up to be quite costly because the decedent personally owned the principal residence. The house wasn't large, but with the booming housing market in Ontario, it was worth over a million dollars. We later found out that this could have been avoided if the house had been jointly owned by the spouses with right of survivorship. Deciding to put property into joint ownership can have family law and tax effects, so this decision needs to be made with the help of advisors.
Once the probate is granted, the Trustee can then distribute the Estate to the beneficiaries in the order governed by the Ontario Succession Law Reform Act. If you have a spouse and no children, the entire estate goes to your spouse. If you have a spouse and children, the spouse is entitled to the first $200,000 worth of assets, with the residue divided evenly between spouse and children. If any children are under age 18 that portion will be held separately by the Office of the Public Guardian and Trustee until the child reaches the age of 18. There are rules regarding distribution of estates with no spouse and no children. The Ministry of the Attorney General of Ontario provides useful information at this link.
For our family, because the Trustee was also a Beneficiary and because she had little knowledge of the law, she invested the majority of the estate distributions into the real estate market (both in Canada and the United States), not knowing that she does not have the right to invest on her son's behalf. When the Office of the Children's Lawyer requested detailed accounting of all financial transactions conducted to determine how much money should be held by the Public Guardian in trust on behalf of her son, she was faced with the difficult decision to either sell the properties or get a loan to come up with the money.
It's been almost two years since my family member passed away and the whole ordeal is still dragging on. It is crucial to plan ahead of time and have a will in place so that your family members can have peace of mind, and so that you can decide how you want to hand down your wealth.
