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Everything you need to know about wills and settling an estate

22 July 2020 by National Bank
Wills and settling an estate

It’s not usually on people’s minds, but preparing your succession has the advantage of making your loved ones’ lives easier while giving you peace of mind. Our expert answers the most frequently asked questions about wills and settling estates.

1. Why write a will?

People who write a will often do it because they want to make things easier and put their affairs in order. These feelings usually stem from wanting to be the one to determine who gets their property. By choosing their inheritors themselves, they’re preventing any potential conflicts and headaches that may result from legal procedures required in settling estates when there’s no will.

“If you pass away without leaving a will, your property is distributed ‘by default’ according to the regulations outlined in the Civil Code of Québec. Having a will therefore means that you can plan who will inherit your property and under what conditions. The clearer the writing, the more you avoid issues for your loved ones,” asserts Johanne Pratte, notary and account manager, trust and estate planning at National Bank Trust.

“Anyone who owns property benefits from writing a will. People who have a more modest estate sometimes believe that planning their estate isn’t worth the hassle. But in fact, settling an estate when there’s no will may be more complicated. Or worse, it could end up costing more for your loved ones.”

“Here’s an example: you pass away without a will and leave behind a building. According to the regulations outlined in the Civil Code, your inheritors are automatically named the executors of the estate (unless they designate one person among them to act as the executor). They will all have to sign all the documents and approve each step of the sale or transfer of the building. This turns into a very long and very complex process for a single building. In such a situation, it would have paid off to name a single executor and to plan for the powers they’re granted to sell the building.”

2. When should you write your will and what kind should you write?

Start thinking about estate planning as soon as you own property. You should review the contents of your will whenever your situation changes, like if you have a baby, if you get a divorce, or if your patrimony has increased or decreased significantly.

In Quebec law, there are three kinds of wills: a notarized will, a holographic will, and a witnessed will.

In the rest of Canada, where notaries aren’t involved, holographic and witnessed wills are more common.

Notarized will
The will is prepared and signed by a notary, then entered into the Registers of Testamentary Dispositions and Mandates at the Chambre des notaires. It won’t have to go through a verification process and it’s harder to contest. In Canada, notarized wills only exist in Quebec.

Holographic will
This document must be both written and signed by hand by the testator. Witnesses aren’t required. It will have to go through a verification process, which adds a delay and an extra cost to settling the estate.

Witnessed will
It’s written by a third party or using technology and is signed by the testator in front of witnesses. Same as a holographic will, it must go through a verification process, which adds a delay and an extra cost to settling the estate.

3. Why opt for a notarized will in Quebec?

Notarized wills make settling an estate easier. Moreover, experts prefer them because they’re carefully written by the notary, who will explain the consequences of your decisions to you. When writing your will yourself, you’re dealing with legal terms that you think you understand, but can mean something else altogether. “Of course, a holographic will or witnessed will is better than no will at all,” Johanne Pratte tempers.

Notarized wills also have advantages in terms of proof. Since they’re considered to be an authentic act in the eyes of the law, it doesn’t have to go through a verification process, contrary to other types of wills. This can be quite costly. You’ll benefit from the advice of a specialist who will explain all the legal consequences of each clause. Of course, the cost varies depending on your estate, as well as the rates of the notary you’re doing business with and where they practise.

4. Who’s the inheritor if there’s no will?

You need to take a look at the province’s legal regulations to find out how the estate will be settled if there is no will outlining this. “This is what you call legal succession or intestate succession,” Johanne Pratte explains. Those who will be named the inheritors are the deceased’s spouse and their immediate family members, which excludes common-law partners and in-laws. In Quebec, the estate will be distributed according to the following criteria:

If the deceased was married and had children

  • A third of the estate will go to the surviving spouse.
  • The remaining two thirds will be shared among the deceased’s children.

If the deceased was married and had no children

  • Two thirds of the estate will go to the surviving spouse.
  • The remaining third will go to the deceased’s parents.
  • If the deceased has no living parents, this third will be shared among their siblings.
  • If the deceased has no living parents or siblings, the entirety of the estate will go to the surviving spouse.

If the deceased was not married, but had children

  • The entirety of the estate will be shared equally among their children.

If the deceased was not married and had no children

  • Half of the estate will go to the deceased’s parents.
  • The other half will go to their siblings.
  • If the deceased has no living parents, the entirety of their estate will be shared among their siblings.
  • If the deceased was a single child, the entirety of their estate will go to their parents.
Table shows how a succession is divided when there is no will.

5. Can you write a joint will?

A will is a personal act that cannot be written jointly with another person, even if they’re a family member, like your spouse, your brother or your sister. Quebec law prohibits joint wills, on pain of nullity. However, you can include a clause to your will the way you would to your marriage certificate. In this case, your surviving spouse will inherit all of the deceased’s property.

“But be careful,” Johanne Pratte adds. “This type of clause was created to benefit spouses.” If they both die at the same time, the succession doesn’t hold up anymore, which means they find themselves in the same situation as if they didn’t have wills.

In some Canadian provinces such as Ontario, Alberta and British Columbia, joint wills are permitted by law. However, it’s riskier for the surviving spouse. Many legal practitioners have their reservations when it comes to enacting the mutual will of a couple, and there is little jurisprudence on this matter.

6. How is an estate settled?

First of all, you must identify the executor. If the deceased was married, you’ll have to proceed with distributing the family patrimony. To identify the executor and inheritors, you have to rely on the wishes outlined in the will. The person whose responsibility it is to settle the estate is tasked with administering the property until they’re distributed to the inheritors. They’re also responsible for closing the deceased’s account, preparing and submitting their income tax statements, collecting the money owed to the deceased, and paying off their debts. Fees that may be incurred as a result of this will be paid using assets in the estate.

“If you haven’t identified an executor or if you haven’t taken the time to write a will, this job will automatically fall on your inheritors. Together, they can choose to elect one executor among them. If the estate only includes a single inheritor, they automatically become the executor,” Johanne Pratte explains.

Because this is a relatively complex process that includes several steps and people, the executor may hire a professional to help them. Many notaries, lawyers and accountants offer these kinds of services. The cost varies depending on the size of the estate and the tasks involved. “In any case, it’s safe to call on a subject matter expert, since settling an estate involves major legal and fiscal aspects.”

“People sometimes believe that estates get settled quickly. In reality, it can stretch over a year or even more if you’re trying to abide by the body of regulations outlined by the Civil Code and tax law. To complete the liquidation process, the deceased’s taxes must be filed for the year they died, and a return for the actual succession must also be filed. Once these two documents have been submitted to the appropriate tax authorities, the federal and provincial governments will each issue a clearance certificate to distribute the assets in the estate.”

7. How does estate law vary from province to province?

Technically, a will is valid throughout the country, regardless of the type of will. It usually has to go through a legal verification process before it can be used. However, what holds up in Quebec doesn’t necessarily hold up in the rest of Canada, as estate law differs from province to province.

In most Canadian provinces, you can prepare a holographic or witnessed will. In the case of a witnessed will, a lawyer is often the person who acts as the witness.

Something else to remember is that if you own property outside of Quebec, or even outside of the country, you have even more reason to plan your estate. Do you own an apartment in Florida? It would be wise to write a will over there, in the United States, which specifically details the property in question and which is written in English. This would make things much easier and would save your inheritors a lot of trouble.

What about estates when there’s no will?

In British Columbia, Alberta and Manitoba, common-law partners and spouses have the same rights. That means they will be inheritors if there’s no will. However, the criteria for qualifying as a “common-law partner” varies from one province to another.

In these three provinces, the definition of an inheritor is broader. If there is no immediate family (surviving spouse, children, parents, siblings, nephews and nieces), the grandparents, great-grandparents, uncles, aunts, great uncles and great aunts may become the inheritors.

In Ontario, common-law partners are excluded from the share of the estate. However, they may ask for support payments if their relationship with the deceased fulfills certain criteria.

To ensure your final wishes are respected and to give your loved ones peace of mind, planning your estate is of great importance. Feel free to discuss the matter with a professional so they can guide you through it.

 

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Legal note: The information that appears in this article is provided for illustration purposes only and is not exhaustive. For advice on your finances and estate planning, and to determine whether the features described in this article are right for you, please speak with your National Bank advisor or, if applicable, a professional (accountant, tax expert, lawyer, notary, etc.). 

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