For all kinds of reasons, some clients feel they are better served by sourcing estate and tax planning tools on their own. An online or store-bought will kit may be free or inexpensive and appear to be what the client is looking for. The same could be said for an off-the-rack suit compared to a bespoke one: once the client looks closely, the item is likely ill-fitting and the client will have to alter the purchase to fit their particular circumstance.
Many will kits do not include key elements, without which a testator’s wishes may be misinterpreted; worse, parts of the will could be invalidated. For example, a testator could have named his surviving spouse and their two unmarried children as equal beneficiaries of his estate and named one of his children as executor. But if all four family members die a common accident, the estate would not have an alternate executor or contingent beneficiaries. Those portions of the will may be deemed to be intestacies.
Will kits may also contain clauses or words the intent of which may not be clear to the courts due either due to the ambiguity of the clauses or the lack of clarity of the language used. Such clauses or words may be stricken from the will or given a contrary meaning, effectively circumventing the wishes of the testator. In one instance, a testator, intending to leave a portion of his estate only to his son, included the phrase “per stirpes,” which effectively means his son’s children will inherit if his son predeceases him. He should have used the phrase “per capita” instead, which means his son’s children would not inherit.
Clients using will kits may not realize that a fundamental requirement for a will to be valid is that the testator had mental capacity. If a will and estate lawyer drafts the will, that lawyer will exercise due diligence and make sure the client has the capacity to execute the will. With an off-the-rack will, that protection may not necessarily be there, which may leave the will open to challenge on the basis of lack of capacity.
When financial advisors and estate lawyers work together, they’re able to know the dynamics of a client’s family and be able to incorporate concerns such as the following into the will:
- Providing for a disabled child (e.g., RDSP, qualified disability trust, Henson style trust)
- Minimizing probate tax (e.g., via alter ego trust, inter vivos gifts, dual wills)
- Minimizing income taxes at the time of death (e.g., via inter vivos gifting, qualified beneficiary RRSP/RRIF designation)
- Passing the family cottage to children (e.g., via inter vivos or testamentary trust)
- Protecting a child’s inheritance from divorce proceedings (e.g., gifting directly into a separate sole account, creating discretionary trust)
- Having assets bypass the estate (e.g., through beneficiary designations, successor holders, joint tenancy with right of survivorship)
- Protecting wealth from spendthrift beneficiaries (e.g., using a fully discretionary trust)
- Preparing for lost capacity (e.g., creating an enduring power of attorney, personal/health care directive, representation agreement, etc.)
- Using appropriate insurance products for estate planning purposes
- Supporting charities (e.g., planned giving, using a donor-advised fund)
- Insuring the executor
Sharing this list of considerations with a client shows that you can take the time to tailor a will that both protects the client’s family and reflects his or her true intentions.
Also read: The perils of not planning for incapacity
Tim Brisibe, TEP, is Director, Tax & Estate Planning at Mackenzie Investments.