No Will! 5 Important Consequences of Dying Intestate

I was sorting through my Mom’s piles of paperwork clutter.  She even had old GIC notices that paid 12% interest, so you can appreciate that this was no small task.

I innocently asked her, “Mom, where do you keep your will?”

She said, “I don’t have a will.”

Say What!

My father passed away last year, and he had a will, and they both had Powers of Attorney, so I naturally assumed that she had a will also.  But you know what they say about assuming.

I conferred with my brother, “I thought you had taken care of this!”

We tried to contact the lawyer who did my dad’s will, but he had long since retired.  I resigned myself to making an appointment for her to get this done.


Problems with dying Intestate

If you die without a will (or one can’t be located), you are considered to have died “intestate.”  Dying intestate means that your province’s intestacy formula will be used to distribute your estate.  Each province has its own intestacy formula.   These rules have no flexibility.  They do not consider your wishes, the needs of your beneficiaries, or any tax rules.  Do you want the government to decide how your possessions will be distributed?  Never assume your province’s intestacy rules are adequate for your situation.

  1. Your spouse may not receive your entire estate 

Many married people believe that their estate would simply pass to their spouse.  Not all couples are protected.  In some provinces a common-law partner has no automatic rights to property.  If you have separated but not yet settled your affairs, your estranged spouse may receive an inheritance.

After all claims, taxes and expenses have been paid the remaining estate is divided into two parts.  Your spouse will receive a “preferential share” of the estate which can range from 0 (e.g. Quebec) to $300,000 (e.g. B.C).  The balance is divided between the surviving spouse and your children.

  1. The court will appoint a temporary guardian of minor children

Assets an underage child inherits must be held in trust by the provincial public trustee or managed by a legal guardian who files regular reports to the public trustee.  The children will receive their inheritance at age 18 or 19 (depending on province).

The intestacy laws might not include an inheritance for children from a prior relationship.

Under intestacy distribution rules, taxes are immediately payable on the portion that goes to the children.

  1. Your assets are frozen.

The courts will appoint someone to administer your estate and take care of your affairs.  This could take months.

In the meantime, what might happen to your investments or other financial affairs, or your business, if no one had the authority to make decisions?

Fortunately for me and my brother, the intestacy rules in B.C. state that when there is no spouse, the deceased assets are divided between the children – which is what my mother wants.

However, there would a long delay and additional costs before her affairs were settled.

  1. Distribution will be delayed

The court appointed administrator performs tasks similar to an executor.  But, once appointed, the administrator’s powers are defined by provincial legislation.  They may have less flexibility than if you had named an executor.

As a general rule, the closest relative is appointed as your representative to manage and distribute the estate and have final say in burial arrangements, but it could be anyone the court deems appropriate.

Creditors who have a claim on the estate will be paid first – after taxes and funeral expenses.

Then the administrator will decide how possessions will be distributed and may even sell off assets that you wanted to be kept in the family.  They may have to apply and wait for court approval to proceed on behalf of the beneficiaries.

  1. Higher administration costs

Without a will, there will be more legal and court costs to administer and settle the estate.

The administrator may be required to post security, such as a bond from a guarantee company or a personal surety, with the court, to protect the beneficiaries (and creditors).

The bottom line

We know how critical it is to have a will if we want our assets to be distributed the way we want.  The cost to draw up a will is a lot less than the accumulating court costs without one.

What about your parents?  That generation tends to keep their financial affairs private and you don’t want to come across as greedily looking for what you’re going to get.  But, it’s frustrating to try and track down a will that doesn’t exist.  It’s important that you know if a will has been prepared and where it is.

As it turned out, my Mom did have a will.  It was in yet another pile of paperwork.  When I suggested that I look after it from now on, she readily agreed.

 

 

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