It is prudent to engage a lawyer to assist with estate planning, as lawyers obtain extensive education on this topic, and will apply their practical experience to create an estate plan that is legally enforceable and cost effective. If additional help is required from an accountant, appraiser, business valuator, or other professional, your lawyer will secure their advice. The cornerstone to a proper estate plan is a well drafted Last Will and Testament, Power of Attorney, and Representation Agreement. The lawyer should also review the designation of beneficiaries in your RRSP, TFSA, and life insurance. If you own one or more companies, then additional planning may be required. If you are over 65, you may want to consider what is referred to as an “Alter Ego Trust”. The lawyer will be your guide.
without a proper Power of Attorney and Representation Agreement in place, your incapacity (caused by illness or accident) means that someone must apply to the BC Supreme Court to become your Committee (ie. guardian) under the Patients Property Act. Such a court application typically costs about $7500; two medical reports are needed, and once appointed by the court, your Committee must regularly report to the Public Guardian and Trustee of BC. The Committeeship order will run for as long as you are alive, and represents an onerous burden for your loved ones. In contrast, if you have a valid Power of Attorney and Representation Agreement in place, your chosen personal representative will be able to manage your affairs and property informally without a court order. The cost of preparing a Power of Attorney and Representation Agreement is significantly less than a Committeeship application.
In the absence of a proper Last Will and Testament, which sets out your particular wishes, your estate will be administered according to the Wills, Estates and Succession Act. Your estate will pass to your spouse, children, or more distant relatives in a manner quite different than how you may expect or desire. Without a Will, one of your next-of-kin will need to act as administrator of your estate. It is more difficult and time consuming to apply for a grant of administration as opposed to probate. It is far preferable to have a valid Will and protect your loved ones.
Probate is the process of establishing the validity of your will. Probate will not be necessary in every instance. Certain assets can pass to someone automatically due to joint tenancy (example: real property held in both husband’s and wife’s names) or named beneficiaries (example: RRSPs, TSFAs, and life insurance policies). In complex estates, the process can take 3 to 5 years. In simpler estates, the process can take as little as a few months.
The cost of estate planning varies depending upon the complexity of your assets. A simple package of mirrored Wills for husband and wife typically costs between $500 to $700. A combination package including a single Will, Power of Attorney, and Representation Agreement is usually under $1000. For more complex estate planning, you may be charged hourly, but it is important to keep in mind that the cost of planning your estate now will translate into much less expense later. Estate planning is truly an investment that saves your personal representative from frustration, and ensures your loved ones enjoy the full benefit of their inheritance.
In BC, a Will-maker does not have complete testamentary autonomy. This means that although you may exclude a child from receiving a benefit in your Will, you must be aware of a provision in the Wills, Estates, and Succession Act which permits your child (including adopted, but not step-children) to challenge your Will. Your child must satisfy a judge of the BC Supreme Court that you neglected to make “just and adequate provision” for him or her in your Will. The court will carefully review the content of your Will and surrounding circumstances to determine if your exclusion or minimal gifting to that child is reasonable. If not, the court may order that your Will be varied to provide that disinherited child with a benefit. It is prudent to secure advice from a lawyer when planning your Will to minimize the risk of your Will being varied. To avoid conflict over your Will, one option (if you are over 65) is to set up an Alter Ego Trust, which allows most or all of your assets to be distributed outside your Will.
As a disinherited child, you can bring a claim under the Wills, Estates, and Succession Act for a court to vary the Will and give you a “just and adequate” share of your deceased parent’s estate. Some of the issues that the court may consider include your contributions or legitimate expectations, whether your conduct or character justifies the disinheritance, whether your parent’s neglect was a reason for the estrangement, whether gifts outside of the Will make up for any gifts denied by it, whether you have siblings that were treated unequally, and finally, whether your parents' reasons were inaccurate or insufficient. If you are wrongfully disinherited, a lawyer will be able to walk you through the steps in challenging your parents' Will.
An executor or trustee is a person named in a Will whereas an administrator is a person appointed when there is no Will in place. The term personal representative is used to refer to both. The role of personal representative can require a serious commitment of time and energy. Some of the responsibilities include taking care of funeral plans and the deceased’s remains; identifying and notifying beneficiaries and next-of kin; preparing an inventory of all debts and assets; paying out any debts and arranging for appraisal, transfer, sale, and distribution of assets; notifying financial and governmental agencies; dealing with insurance and tax issues; preparing and submitting probate documents; and generally ensuring all legal matters are in order. Often, these responsibilities are too much for one person to take on alone. In some cases, it makes sense to name a trust company that has skilled personnel working in-house who can readily deal with the complexities of your estate. Keep in mind that your representative can be personally liable for mistakes made in discharging their duties. An experienced lawyer can aid in both estate planning and estate administration, and help your representative navigate through this difficult time.
Joint tenancy with a right of survivorship is a common and useful planning tool, but potentially dangerous as well. There can be unexpected pitfalls. Placing your family home in joint tenancy with one or more of your children will avoid probate fees, but may result in other problems. For example, you may trigger a partial loss of the principle residence exemption under the Income Tax Act and the accrual of taxable capital gains, or you may experience disagreements with your child and a loss of control over the property. Your child may assert that you have made a gift inter vivos and demand a share of the sale proceeds, or you may discover that one of your child’s creditors or spouse has filed a lien or judgment against the title of your property. Upon your death, the surviving joint tenant may decide to retain ownership and not treat it as part of your estate following your death. The same problems may arise in the context of bank and investment accounts. To ensure your wishes are carried out, it’s best to get legal advice before you alter the ownership of your assets.