3 estate planning mistakes

Estate planning can seem overwhelming but, like anything else, the best way to learn may be through mistakes. Here are three common estate planning offences that you can learn from without committing them yourself.

Failing to prepare a will

What happens if you pass away before making a will? Your assets will be distributed according to provincial legislation, regardless of your wishes.

The Ontario Succession Law Reform Act, for example, sets out the following distribution rules.

If you have:

• A spouse only: Your entire estate goes to your spouse.
• A spouse and one child: The first $200,000 of your estate goes to spouse, with the remainder split equally between your spouse and your child.
• Spouse and children: Again, the first $200,000 goes to your spouse, but now one-third of the remainder goes to your spouse. The rest is distributed equally among your children.
• Children and no spouse: Your children share the estate equally.
• No spouse or children: Your entire estate goes to your parents. If they’ve already passed away, any siblings share the estate equally. Children of a deceased sibling share their parents’ share. If only your nieces and nephews are living, they share equally.
• No lawful heirs: Your estate becomes property of the province.

Failing to keep your will current

What if you have a will, but it’s dated? An out-of-date will can be almost as bad as no will at all. You should be updating with any significant life changes such as:

• Marital status changes: In Ontario, marriage revokes your will entirely. If you divorce, your will is read as if your former spouse died before you. For better or worse, a separation has no effect on your will.
• Nature or size of your assets change: The greater the change, the less your will accounts for the current nature of your estate.
• Residence change
• Loss or addition of beneficiaries
• A change in health

Creating a DIY will

There are three basic types of wills: formal (typed document, signed by the testator in the presence of at least two witnesses), notarial (only used in Quebec) and holographic (in the testator’s own handwriting and signed by them, no witnesses required).

Estate experts will always recommend that you have a formal (or notarial) will prepared by an experienced lawyer (or notary). There’s good reason for this. Typical problems you could face with a DIY will include:

• Failure to name your executor and an alternate executor
• Failure to account for all assets, thereby creating a partial intestacy: Like a full intestacy (dying without a valid will), this means that assets not included in your will would be distributed according to provincial legislation.
• Gifting more than you have: This can create confusion, or worse, legal troubles between beneficiaries.
• Failure to appreciate the rights of spouses and dependants
• Improper wording or invalid provisions: A properly drafted will ensures that there’s no disconnect between your wishes and what’s communicated by the will. It also ensures the whole will isn’t thrown out as invalid.

Learning from your mistakes is a good life philosophy, but when it comes to estate planning, there aren’t any second chances. So it’s best to learn from the mistakes of others.

Also keep in mind that your will is just one part of your estate plan. Once tackled, you may want to consider other components such as powers of attorney, incapacity planning, and trusts.