The meat of the will is ‘who gets what’. There are two primary strategies for setting out who gets what from your estate:
- The ‘pool then split’ strategy, which involves pooling all assets, paying all expenses and all specific bequests, and then dividing the monetary value of the balance (the residue) among the beneficiaries in ‘shares’; or
- The ‘named gift’ approach, which involves giving specific assets (or the proceeds from specific assets) to specific beneficiaries.
- “give my daughter, Jane, my RRSP, and give my son John, my house” is a ‘named gift’ or ‘specific bequest’ type of disposition.
- “sell my assets, pay my debts, and then divide the residue equally between my daughter Jane and my son John” is a ‘pool then split’ approach.
Generally, the ‘pool then split’ approach has a much higher chance of being ‘fair’ or ‘in keeping’ with your original intentions, because the ‘named gift’ approach often fails to deal with who pays what debts and expenses (such as taxes and executor fees). For instance, in the example above, if there were no other assets besides the RRSP and the house, all of the executor fees would be paid by Jane from the RRSP and none by John from the house.
Complex legacies can really complicate the process of applying for probate, and administration of the estate.
We understand the desire to leave a legacy directly to some children, especially grandchildren. However, gifts to children make a) probate, and b) estate administration considerably more difficult and expensive. Any gift over $10,000 requires getting the Office of the Children’s Lawyer involved, and lengthy trusts can impose on the trustee (often the executor) long term duties to manage money for the children. To reduce cost and hassle consider gifts that take the form of contributions to RESPS or directly to a parent of the child.
Bequests to charities are a fundamental part of estate planning. We recommend them. However, some key points to consider include:
- Make sure that you identify the charity properly; use the full proper legal name;
- Make the gift clear and simple;
- Get advice to make the gift tax efficient;
- Consider making gifts before you die – that way you can be certain that they are made right, and you get to see your donation in action.
A lot can happen between the time you make your will and when you die. In particular, some of your beneficiaries may pre-decease you. Do not assume that everyone younger than you will outlive you. It is very important to structure your legacies in a manner that provides clearly, for all aspects of the estate, what happens if any beneficiary pre-deceases you. If you do not, you risk creating a partial intestacy for your estate.