Our clients are often surprised to find that assets they presumed would be governed by their will in fact pass outside of their estate. This can impact your estate in significant ways.
Generally speaking, assets held in a person’s sole name that do not have a designated beneficiary form part of the estate following the will-maker’s death, whereas jointly-owned assets and assets with a designated beneficiary do not. Of course, there are some qualifications to this general statement.
Things can get sticky when, for example, real property is owned jointly. If the joint owners own the property as joint tenants, the right of survivorship that characterizes this form of ownership will cause the property to pass to the surviving joint outside of the will of the first owner to die, and the surviving joint tenant will inherit the full value of the property. The same concept can also apply to jointly held bank accounts. Although this form of ownership can offer positive results with proper professional planning (such as helping folks delay probate fees and, in some cases, avoid probate altogether), in other circumstances it can lead to unhappy beneficiaries (such as when it was not a will-maker’s intent to leave his or her estate with insufficient funds to satisfy the gifts made in the will).
Registered investments (RRSP, TFSA, RRIF, LIRA, etc.) and insurance policies can also cause some confusion for clients who presume these items pass into their estate. Although that is sometimes the case (for example, if the named beneficiary predeceased the will-maker, or where no designation was ever made), more often than not these items pass outside of the estate directly to the named beneficiary. This too can be a good thing as the funds generally make it into beneficiaries’ hands more quickly than gifts made by a will that must first be probated. However, if designations have not been updated regularly, this can result in unintended gifts or tax consequences.
These subtleties can seriously derail even the most well thought out plan, but we are trained to catch the details that the average person will miss. Call or email us today to see how we can help you make sure nothing slips through the cracks.
This article is intended for information purposes only and should not be taken as the provision of legal advice. Grace C. Cleveland is a lawyer with the law firm of Cleveland Doan LLP and can be reached at (604)536-5002 or firstname.lastname@example.org.