Estate Planning: Wills

A will is a written document in which a person provides for the distribution or administration of property after his/her death.

Anyone over the age of 18 years who has any property he wishes to direct to others in the event of his death.

1. In order to make a valid will, a person must have sufficient mental capacity at the time he/she is giving the instructions to the lawyer.  So long as this is the case, the will remains valid even if the person no longer has sufficient mental capacity at the time the will is executed.  The legal test for mental capacity is a follows:

• the person making the will must understand the nature and extent of his/her estate (ie. he must know what he owns and what he is giving);
• the person making the will must appreciate the nature and effect of the will (ie. he must know what it is intended to do);  and,
• the person making the will must appreciate who his beneficiaries should be (ie. is he properly taking care of those persons he owes a moral responsibility to?  If not, is there a rational reason for the omission?)]

2. The purpose for these requirements is to ensure that the person making the will knows the nature and effect of the document he is executing, and that he is doing so with a free and disposing mind.  If a person does not have sufficient mental capacity, the will is void.  Therefore, if there is any uncertainty as to the person’s capacity, you should notify the lawyer of your concerns prior to having him meet with the client.

1. A will must be in writing (s. 4);
2. The person making the will must have sufficient mental capacity to do so at the time the instructions are given.  So long as this is the case, the will remains valid, even if the person no longer has sufficient capacity at the time when the will is executed;
3. The person making the will must be over 18 years of age (s. 9).  The only exceptions are if the person making the will:

• is or has been married;
• is a member of a component of the Canadian Forces under the National Defence Act;
• is a mariner or seaman;  or,
• has children (but only to the extent that the person making the will is making a disposition or gift to the benefit of any or all of those children).

4. A will must be signed at the end or the foot of the will by the person making it (s. 5);
5. The person’s signature must be witnessed by two other persons who are present at the same time.  The witnesses must also sign the will in the presence of the person making it.  The only exception is where the person making the will does so entirely in his own handwriting and signature.  In that case, witnesses are not required (ss. 5 and 7).
6. The witnesses to the will should not be recipients or potential recipients of property under the will; otherwise, the gift or distribution to that witness is void.  This does not mean that the will is invalid, but witness becomes disqualified from receiving anything under the will (s. 13).  This rule, however, does not apply to a witness who is merely a creditor of the person making the will.  The creditor can still advance his claim as against the estate in order to collect upon the debt (s.).  This rule also does not disqualify an executor from being a witness, so long as he is not also a beneficiary under the will (s. 15).

1. All of a person’s real and personal property that he/she owns at the time of his/her death forms part of the will.  The only exceptions to this rule are the following:

• Property held in trust by the person making the will on behalf of another person.  Since the person making the will does not “beneficially” own such property, it is not his to give away;
• Life insurance proceeds.  Under the Insurance Act, the designated beneficiaries under an insurance policy are the persons entitled to the proceeds of that policy notwithstanding anything to the contrary that may be stated in the persons will.  There is no similar legislation, however, governing designated beneficiaries under an RSP and therefore, such designations must comply with the formal requirements of a will in order to be valid.  This has posed tremendous confusion and controversy in the past;  and,
• Property held jointly with another person.  The key distinguishing feature of jointly held property is the right of “survivorship”.  This means that the deceased’s interest in the property automatically goes to the surviving joint tenant.  This must be distinguished from property which is held by two or more people as tenants in common.  In this latter case, each person only owns a certain share or percentage interest in the property and there is no right of survivorship.  Such property does form part of a person’s estate and can be disposed of in a will.

2. Ultimately, it is important for us to know what forms part of a person’s estate in order to know whether they even need a will, and in order for us to better assist our clients in planning their estates (both financially and legally).

1. A will only comes into effect upon the person’s death (s. 22).  Until that time, a person can change or revoke his/her will as often as may be required.
2. A person can change his will by either revoking it and making a new one, or by amending the existing will through a written document called a “codicil”.  In order for a codicil to be valid, it must follow the same rules that apply in making a valid will.
3. A person can revoke his will by doing any of the following (s. 16):

• making another will in accordance with the Wills Act;
• preparing a written declaration of intention to revoke the will, which declaration must also comply with same formal requirements as making a will;  or,
• burning, tearing or otherwise destroying the will by the person who made it, or by some person in his presence and by his direction with the intention of revoking it.

(Previously, in Alberta, getting married automatically revoked your will.  In 2012, Alberta amended the Wills and Succession Act to remove the clause regarding this; as such, marriage will not revoke your will unless the will explicitly states so.  Also in the new Act, getting divorced or ending a relationship will revoke gifts to your ex-spouse or partner.)

1. A will allows a person to direct his property to desired recipients upon his death, thereby providing for certainty as to who will inherit his estate.
2. People often incorrectly assume that the existing legislation will automatically distribute their property for them even if they do not have a will.  Quite often, this assumption is incorrect since the legislation, itself, can cause a degree of confusion and conflict.  In recognizing the uncertainty that may result from pure reliance on the legislation, one must consider the following:

• The Intestate Succession Act will provide for a distribution of a person’s estate in the event he/she dies without having made a will.  According to that legislation, the first recipient of the deceased’s estate will be his/her surviving spouse and children.  If there is no surviving spouse or children, the estate will then be distributed to the deceased’s parents, etc.  If there is absolutely no one who is able to receive the deceased’s estate, the Act provides that the ultimate heir is the Crown.
• The distribution under the Intestate Succession Act works well in some situations, but not in others.  For instance;
  • If a husband and wife do not have children, and they both die in a common accident, it becomes very difficult to determine who died first.  This dilemma is resolved by the Survivorship Act.  That Act presumes that the older person died first.  Therefore, if the husband was older than his wife, he would be deemed to have died a split second before her.  Since the wife is the “surviving” spouse, she would inherit her husband’s entire estate.  However, since she died shortly afterwards, their combined estates would now be inherited by her parents.  Question:  Did the husband really want his entire estate to go to his in-laws?
  • Similarly, if a husband and wife have no children and die in a common accident, a conflict may arise with regard to the potential recipient of insurance proceeds.  Under the Insurance Act, the legislation assumes that the beneficiary under a life insurance policy died first.  Thus, if the husband had named his wife as his beneficiary, she would be deemed to have died a split second before her husband.  However, the Survivorship Act deems that the husband died first.  Question:  What happens to the insurance proceeds?

3. A will is also the first step that a person takes in planning his estate in order to minimize any tax consequences and probate costs upon his death.  In order to illustrate this, the following examples may be of assistance:

• A husband and wife have acquired numerous properties that they wish to give to their children to enjoy once they have passed away.  The Income Tax Act deems that all such property is “disposed” of upon a person’s death.  Thus, even if the properties have not been sold, but simply gifted to the children in a will, substantial capital gains taxes may be triggered.  This problem may be resolved by structuring a s. 85 rollover under the Income Tax Act.  In such a rollover, a corporation is formed with the children as shareholders.  The property is “rolled” into the corporation without triggering any capital gains tax.  Since the corporation has an indefinite life, the children will indirectly “own” the property in the corporation, and they will be able to continue enjoying that property for so long as they remain shareholders;
• Another situation which may arise more commonly is where a person does not have an overly large amount of property in his estate, but is concerned about avoiding the cost and inconvenience of probating his estate.  Probate is the official court process of authorizing an executor to act under a will.  It requires a formal court application and the fees charged by the court are often based upon the value of the estate.  Probate is not necessary in all cases, and by addressing one’s mind to this problem at an early stage, a person can actively minimize or eliminate any need for probate.  For instance:
  • As much property as possible can be held jointly as between the person making his will and the desired recipients of that property.  This may include land, shares, bank accounts, etc.  Since joint property does not form part of a person’s estate, probate will not be required to effect the transfer of this property;
  • The person should check with his bank in order to determine the maximum balance allowed in an account without the necessity of obtaining probate.  He should then ensure that his account balances are less than the maximum amount at any given time.

1. Make sure you thoroughly understand your will at the time you execute it;
2. Make sure you review your will at least once per year in order to ensure that your will continues to reflect your wishes and your current circumstances;
3. Make sure that you revise your will as may be required from time to time;
4. Make sure that you maintain a detailed and updated list of all your investments and bank accounts, and that this list is either kept with your original will or a copy of it.  This will make the executor’s job substantially easier since his major obstacle is usually determining what the deceased owned and where it is located;
5. Make sure that you have destroyed any previous wills made by you.  This will help to prevent confusion as to which will is the valid will upon which the executor should rely;
6. Make sure your original will is kept in a secure, fire proof area that is easy to locate.  Many people will either keep their original will in their safety deposit box or with their lawyer.  The Law Society of Alberta requires that lawyers keep all original wills in a fire proof vault for safekeeping.  Lawyers do not usually charge any fee for maintaining such wills in their possession, but simply provide such storage as a complimentary service to their clients.  The reasons why many individuals decide to keep their original wills with their lawyer are that:

• It ensures that no one has tampered with the will;
• It ensures that the executor is dealing with the latest version of the will;  and,
• The lawyer is the first likely person that the executor will call, in any event, for advice and direction in administering the estate.

1. Make a brief list of the major assets that you own which form part of your estate.  Eliminate any items which are held jointly, held in trust, or that constitute life insurance proceeds.
2. Make a list of all the people you feel you have a moral obligation to take care of in the event of your death.
3. Decide generally what you want done with your property when you die (ie.  Leave everything to your spouse and/or children?)
4. If property is being left to your children, decide how old they must be before they are entitled to that property absolutely.  Young children cannot usually manage large sums of money on their own and therefore, such inheritances are usually held in trust for them until they reach a certain age.
5. Decide if there are any specific gifts you wish to make to particular individuals or organizations (ie. family heirlooms?)
6. Decide who you would like to appoint to carry out your will when you die.  This person will be named as the executor in your will.  It is important to ask the person whether he/she is agreeable to being your executor before naming him/her as such in your will.  The role of an executor is quite onerous and time consuming and should not be taken lightly.  Usually, the first choice is your spouse.
7. Decide on an alternate executor in case your first choice is unable or unwilling to act when the time comes.
8. Ensure that the executors you choose live in the same province as yourself.  If probate is required, this will eliminate the need for the payment of any bond by the executor.  Quite often the courts will require an out-of-province executor to post a bond in an amount equal to half the value of the estate.
9. Decide who you would like to take care of your children if you and your spouse should be unable to do so.  These people can be named as guardians of the children in your will.  Although this wish is not legally binding under the Wills Act, it given tremendous weight by the courts.
10. Choose a lawyer you are comfortable with and who will take the time to help you plan your estate to carry out your wishes. 

We hope this information is of assistance to you in preparing to make your will.  Once you have addressed your mind to these 10 issues, we look forward to receiving your instructions in the preparation of your will.  We will then be in a position to begin drafting your will.