More than half of Canadians do not have wills, according to estimates. And of those that do, many may be outdated or improperly drafted.
Here are five common mistakes people make when drawing up wills.
- Assets are not described accurately, or have changed form. For example, real estate is not given the correct legal description. Or an operating company or other assets are reorganized between the date the will is drafted and the testator’s death, and they are held in a different corporation or no longer directly. The intended beneficiary may receive nothing, while another beneficiary may receive an unintended windfall. (Read: When your client wants to change beneficiaries)
- A beneficiary is not correctly identified. Also, if beneficiaries are described as a group, the will must clearly define the group, such as “my grandchildren,” and the date for determining whether someone is a group member (e.g., “as of January 31, 2014.”). Problems can also arise where a charity is not described by its correct legal name and there is an ambiguity as to which charity is to benefit. If a named beneficiary is no longer alive when the testator dies and was a close family member, provincial legislation generally allows the gift to go to that deceased beneficiary’s family members, unless a contrary intention is expressed. It’s possible this may not have been what the testator intended.
- Trusts are ineffectively drafted and may not legally defer the time a beneficiary is to receive a gift. So a young beneficiary may become entitled to a substantial inheritance at the age of majority, instead of at a more financially mature age such as 25 or 30. (Read: Faceoff: Should young people have wills?)
- Trust terms fail to set out how to deal with all trust property, including all income and capital of the trust during the lifetime of a primary beneficiary of the trust and after his or her death.
- Trust terms do not consider the legal limits for the lifetime of a trust, if any, according to the relevant provincial law. This may result in the trust being void or voidable.
It is important to periodically review a will with proper professional assistance to ensure it is current and will be effective to carry out individual goals and objectives.