Over the course of my practice I’ve had clients, family and friends all make pronouncements with respect to matters related to Wills and estate planning as if the statements are fact, when in reality they are often myth. Being someone whose profession operates on fact, I will try to set the record straight. From time to time though, the prosthelizer is so certain in his or her “cocktail party advice”, that attempting to set the record straight is challenging. In today’s blog I’d like to debunk some of the myths.
Myth #1 – My spouse and I own everything jointly so I don’t need a Will.
I can’t tell you how many times I hear this from friends and family. The most obvious response to this is – well what if you die together? While the odds of that happening are remote, the odds of one member of a couple dying, with the other thereafter failing to ensure they have a Will, are not. More importantly, there is a high probability that relying on the understanding that all your property is jointly owned for all time during your relationship will inevitably miss something. Wouldn’t it be a shame if all it took was one bank account that passed on an intestacy to cause angst to your surviving family.
Myth #2 – Probate will cost my estate money! And Time!
It is true if that probate of your Will is needed in order for your executors to administer your estate, an application to the Court is needed and a tax will need to be paid. [In Ontario all value of the estate above $50,000 that is governed by the Will is taxed at a rate of 1.5%]. It is not true, however, that this means probate should be avoided at all costs. As is the case with all planning, particularly tax planning, a cost-benefit analysis needs to be done. In particular, are the probate tax savings to be realized on your death more than the planning costs you will incur today, having regard to the time value of money.
After engaging in a cost-benefit assessment, you need to understand the potential risks to you of the planning strategy you may be advised to use to avoid probate. Given the tax is payable based on the value of the assets of your estate when you die, many of the common planning strategies involve you giving up ownership and/or control of your property. The risks associated with your loss of ownership and/or control must be weighed against the savings.
If probate is needed, it is true that there is an application to the Court that does take time to process. It is, however, an over-the-counter application such that it typically does not require a personal attendance before a judge.
Finally, in some circumstances it is quite appropriate for your executor to want to probate the Will. The probate process will give your executor the protection of knowing they are administering your estate on the basis of a Will that has been confirmed by the Court to be valid.
Myth #3 – Without a Will, the Government will take my estate!
If this is an impetus for you getting a Will then I am quite content with you operating on the basis of this myth. It is, however, a myth. I’ve blogged on other occasions about what happens if you do not have a Will. Suffice it to repeat here that if you die without a Will, the law has an ordering as to how your estate is divided among your spouse, children, remoter descendants, parents, and siblings. While there is a chance that in the event of a total failure of familial relationships that your estate will escheat to the Crown, this is not the starting point but rather the “beneficiary” of last resort.
Stay tuned in my next blog for some other Myths I’ve come across.