It’s a common misconception: as long as I have a Will, it trumps everything and the Will is all I have to worry about.
The truth is, your Will is but one tool in legal and financial Estate Planning and it is no more or less powerful than other estate planning tools.
It is fundamental to planning to understand how your property is transferred upon your death.
Generally, your assets will be transferred to beneficiaries in one of two ways:
- Your assets will become part of your estate and be distributed in accordance with the instructions dictated in your Will, or;
- Your assets will be transferred straight from the institutions that hold the assets to surviving joint owners or to named/designated beneficiaries on various investment or insurance products.
It is extremely important that you understand the interplay between your estate assets and the assets that will go directly to beneficiaries/surviving joint owners.
Generally, if you own joint assets with your spouse, on your death the surviving joint owner will become the sole owner by “right of survivorship”. These joint assets will not become part of your estate. If you have joint assets with any other person who is not your spouse, the general rule does not apply.
There are specific investment and insurance products that permit you to name or designate a beneficiary. These products include RSP/RIFs, TFSAs, Life Insurance benefits, pension benefits, and insurance investments known as segregated funds. If you have named/designated beneficiaries, the investment or benefit will be transferred directly to your named beneficiaries if the beneficiary is still alive. Meaning, they will not become part of your estate; your Will has no bearing on these assets. If you do not name a beneficiary on a product or your beneficiary is dead, then the default is that such assets will become part of your estate and directed accordingly.
All other assets (eg. sole bank accounts, sole investment accounts, solely owned shares in corporations, real estate in your name alone, etc.) will become part of your estate and will be directed by the terms of your Will.
You may also have obligations under a contract (eg. marriage agreement, separation agreement, shareholder agreement) that will override the terms of a Will and force your Estate Trustee to distribute the subject assets according to the contract, despite what the Will says. You may also have obligations under a piece of legislation that gets in the way of a plan. Our Family Law Act and Succession Law Reform Act have a say in how you write your story.
The point of all of this: it is vitally important that all your legal and financial estate planning tools work together to tell the same story. When you have conflicting direction among these tools you must expect an unhappy ending. Being purposeful and intentional in your planning allows you to write your last chapter.