A will is the most important document you will ever sign. It ensures your estate is disposed of in accordance with your wishes, ensures loved ones, especially elderly spouses, young children and other dependents are taken care of and achieves tax minimization objectives. A will is the central element of your estate planning strategy.
Validity of a Will
In order for a will to be valid, the testator (the individual making the will ) must have the capacity to give instructions - the testator must be capable of appreciating the nature of the act of making a will, the extent of their property, and the nature of the claims of persons who ought to receive the property. This determination is made both at the time the instructions are provided and when the will is signed.
In addition, the will must have been given without the presence of undue influence or duress. This exists where a person exerts a degree of pressure on the testator which result in instructions to the lawyer which do not reflect the wishes of the testator.
Finally, in order for a will to be valid, it must be signed in accordance with the requirements of the Succession Law Reform Act. The will must be signed by the testator in the presence of two witnesses who are not beneficiaries under the will. There are limited exceptions to these requirements, such as a holographic (handwritten) will and wills made by military personnel in specified circumstances.
Elements of a Will
Revocation of Previous Wills and Codicils
Although a will is revoked by the making of a new will, wills commonly contain a provision which expressly revoke all prior wills and codicils. A codicil is a document used to amend a will.
Appointment of Executor and Trustee
In a will the testator appoints one or more executors and trustees. An executor is the person appointed to carry out the terms of the will. The trustee is the person appointed to act as trustee of any trusts created under the will. More often than not, the same individual or individuals will be appointed as both the executor and trustee. However, separate trustees may be desirable in certain circumstances. For instance, where a trust is created for the benefit of a minor, it may be desirable to appoint the person appointed as guardian of the child to also act as the trustee of the child's estate. Alternatively, if there is a large estate, it may be desirable to appoint a trust company to act as trustee and manage the trust(s).
Bequests and Devises
A bequest or legacy is a gift of specific property given under a will. It could include a gift of a specific amount of money or item of jewelry or other property. Generally and unless specified otherwise, a bequest is only given if the beneficiary is living. If the beneficiary predeceases the testator, the bequest is said to lapse and forms part of the residue of the estate. A devise is a gift of real property under a will and generally also lapses where the beneficiary predeceases the testator.
It is important to note that it is generally advisable that you bequest only sentimental and significant property. If the will packed full of bequest could result in administrative burdens and legal uncertainties, as items of property which have been bequested may be replaced over times or no longer owned at the time of death. Instead, it is common to prepare a Memorandum of Wishes or Memorandum of Direction. This is a document which is stored with your will and which sets out how you would like your property to be distributed. It is not binding on your executor, but your will may direct that your executor be guided by this memorandum.
The residue of an estate is the sum of the assets remaining after the debts, expenses, taxes and fees have been paid and bequests and cash legacies have been made. A will should set out the beneficiaries who are entitled to the residue of the estate, generally divided into percentages or portions. If all or part of the residue of an estate is not distributed, this portion of the estate will be distributed in accordance with the rules of intestacy.
Guardians of minor children
A testator may appoint a custodian for a minor child and a guardian of a minor child's property in a will. However, this appointment is only effective for 90 days. The custodian and guardian must make an application to the court to become a permanent custodian and guardian. Although the court will give weight to the wishes of the parents, the court will do what is in the best interests of the child.
A will may establish trusts in which legal ownership of property is given to the trustee for the benefit of others (the beneficiaries). The key element to a trust is the separation of legal and beneficial ownership in the property. The use of a trust permits the testator to give property to a beneficiary, while imposing constraints on how that person may use the property. Trusts are commonly used in estate planning for the maintenance and education of minors; for the maintenance of a spouse during their lifetime while directing to whom the trust funds will go on the death of the spouse; for tax planning purposes; to provide for the education of grandchildren, and to safeguard and manage property left to young adults or spendthrifts.
Administrator Powers of Trustees
It is common for the will to provide the executor and trustee with administrative powers to enable them to manage the estate. These powers commonly include the power to pay debts, sell real estate, deal with business interests, determine capital and income, lend and borrow and make income tax elections.
Changes to a Will
It is important to review your will from time to time to ensure it is current. The following is a list of some major life changes which may necessitate a change being made to a will:
- Marriage, separation or divorce
- Birth of a child or grandchild
- Death of an executor, trustee, beneficiary, custodian or guardian
- Significant change in assets
- Change of residency or citizenship
Changes to a will can be made in two ways. Minor changes can made by a codicil, a legal document which amends the will. If major changes are required, or there have been several minor changes, it may be desirable to create a new will.