Wealth_Inheritance_Papers

People’s financial circumstances change. And as that happens, their wills should change, too.

Is a codicil—a small amendment to a will—the best way to change or modify an existing will, or is writing a whole new will better? Here’s a look at the implications for the executor one way or the other.

A question of complexity

Codicils aren’t common, says Lauren Randall, associate at BoyneClarke LLP in Dartmouth, N.S. She writes them occasionally for her clients—they’re not for everyone, she says. “It sort of depends on when the change comes about, and what stage testators are at in their lives. I don’t see young people doing codicils. It’s more people in their 50s, 60s, 70s.”

To determine if a client should use one, Randall uses this simple litmus test: “If the testator is just making one or two simple changes, then a codicil is the best way to go,” she says. “But if they’re going to be making six, seven, eight changes, […] they might as well just get a brand new will. It’s more straightforward, it’s easier for everybody to follow at the end of the day and, cost-wise, it’s going to be the same.”

Randall acknowledges there is no legal limit on how lengthy a codicil can be, but says that doesn’t mean it’s appropriate for complex estate changes. And what qualifies as complex is often a judgment call. “There isn’t a line in the sand. Changing an executor is not complex; that can be handled with a codicil,” she says. But, “If you’re talking about changing beneficiaries—that’s where [things get] more grey.”

For example, adding a grandchild who didn’t previously exist is pretty straightforward, says Randall. Conversely, “if you’re totally revising your beneficiary structure, then I think a will is a better way to go because it’s less likely to be questioned at the end of the day.”

Clients also have to think about privacy. “If you’ve decided to disinherit someone and you’re doing it in a codicil, everyone can see what the original decision was,” Randall cautions. “That’s the thing for me that raises flags.”

Making a significant change via a codicil could cost $500 or $600, says Randall, which is the going rate for a basic will in Nova Scotia. At that point, she says, why not just write a new document: one that’s more current, and therefore less open to potential challenge? Even better, “this previous version that you’re changing, nobody’s ever going to see that”—particularly the person who’s been disinherited.

A different answer

Given these potential issues, is a codicil still a useful estate planning tool? “The answer today is different from the answer five or 10 years ago,” says estate lawyer Wesley Jackson of Brampton, Ont. “Technology is such that, especially for a pre-existing client where I wrote the will in the first place, it’s much faster to simply generate a new will,” he points out.

Less time means less cost for the client, and there are other advantages: “A new will has a current date on it, it’s going to be a complete document, and there are not going to be any arguments as to whether or not it conflicts with the will or is properly drafted to conform with the language of the will,” Jackson says. “It’s a fresh document.”

That said, when a given change is specific to an asset or to an individual, a codicil can be appropriate, Jackson acknowledges. A typical example: a client receives an antique watch or similar heirloom. Then, “It’s an individual asset that’s come into my estate that I want to deal with in a specific way. So I’m not going back and actually changing anything about the will—I’m just adding something very specific to it,” he explains.

Nonetheless, Jackson acknowledges codicils can sometimes cause difficulties for executors if they cover a contentious asset or are written unclearly. If an executor finds himself questioning the terms of a codicil, Jackson recommends heading to a lawyer’s office. “When it comes to codicils, the first thing a lawyer can clarify is: ‘Yes, this is problematic,’ or ‘No, this isn’t problematic.’ If it is, who are the people who need to be notified and what are the timelines?”

Given all these complexities, make sure clients who are considering codicils are aware of all the factors when deciding whether to amend or create a new will.

Codicil or new will? A quick guide

Add a codicil if you’re…

Changing an executor – If your client’s choice of executor has passed away, or no longer wants the job, naming a new executor is simple.

Changing guardianship – If the will named guardians that have moved or divorced, the change can be made in a codicil.

Adding a beneficiary – Adding a new grandchild to the original will is simple.

Adding to an existing bequest – In other words, boosting a gift that already exists within the will instead of adding a new bequest.

Re-write the will if you’re…

Changing (or creating) trusts – Trusts are complicated legal arrangements that require details too complex for a codicil.

Removing beneficiaries – Any disinheritance (particularly the act of disinheriting children) is likely to cause conflict or friction among clients’ heirs, and is better dealt with in a new will.

Concerned about privacy – If the testator doesn’t want anyone (particularly beneficiaries) to see the terms of the old will, then write a new one.

Dealing with multiple codicils – The more codicils, the greater chance of confusion, contradiction and/or lost paperwork.

James Dolan is a Vancouver-based financial writer.

Originally published in Advisor's Edge

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