As poll after poll reveals, only about half of adult Canadians have a will in place.
This is despite the fact that these surveys also consistently show that most Canadians appreciate the importance of preparing a will, and plan to do so in the future. But if they don’t follow through with that plan, they could die intestate.
When do intestacy rules apply?
Intestacy rules most commonly apply where a person dies without a will. They may also apply where a will is found to be invalid and there is no prior will, or where a will fails to dispose of some or all of the deceased’s assets, resulting in a full or partial intestacy.
The last situation is generally the result of poor drafting. Full or partial intestacies may occur when:
- the will is silent as to what is to happen to the residue of the estate;
- one or more beneficiaries predecease the testator, which the will does not address; or
- a gift fails on legal grounds (e.g., there is a finding of undue influence or there is a gift to a former spouse who is no longer entitled to take it).
What do the rules say?
Where a person dies without a valid will (in whole or in part), their assets are distributed according to the formula set out in the applicable provincial legislation. In Ontario, the distribution scheme is set out in the Succession Law Reform Act as follows. If the deceased has:
- a spouse only, the entire estate goes to the surviving spouse;
- a spouse and one child, the first $200,000 (the “preferential” share) goes to the spouse; the remainder is split equally between the spouse and child;
- a spouse and children, the first $200,000 goes to the spouse; the remainder is split one-third to the spouse, and two-thirds shared equally among the children;
- children, but no spouse, the children share equally;
- no spouse or children, the estate goes to any surviving parent(s); if the parents are predeceased, the siblings share equally, with children of a deceased sibling sharing their parent’s share; if only nieces and nephews survive, they share equally;
- no lawful heirs, the estate escheats to the Crown (becomes property of the province).
Other common-law provinces provide variations on this distribution scheme, with a spouse’s preferential share ranging from nil to $300,000, depending on the province. Some provinces prescribe special treatment for the matrimonial home and/or other matrimonial property.
But Quebec’s intestate distribution scheme, below, is significantly different. If the deceased has:
- spouse and child(ren), one-third to the spouse, two-thirds to the children;
- child(ren), no spouse, all to the children;
- spouse, no children, two-thirds to the spouse, one-third to the privileged ascendants (parents);
- spouse, no children, no parents, two-thirds to the spouse, one-third to the privileged collaterals (siblings or first-degree descendants);
- no spouse, no children, equally between the privileged ascendants and the privileged collaterals;
- spouse, no children, no privileged ascendants, no privileged collaterals, all to spouse;
- no spouse, no children, no next of kin (eight degrees), the seisin of a succession is vested in the provincial minister of Revenue (the province takes possession of the assets).
Who qualifies as a “spouse”?
Although common-law couples are now treated the same as legally married spouses for most purposes under the law in Canada, this is not uniformly true for purposes of intestate succession.
In Ontario, New Brunswick, Prince Edward Island and Newfoundland, common-law spouses are not entitled to a distribution on intestacy. In B.C., Alberta, Saskatchewan and Manitoba, common-law spouses are entitled.
Surviving partners of a “civil union” in Quebec and of a “domestic partnership” in Nova Scotia are also entitled to inherit on intestacy. Interestingly, there is no standard definition of “common law” that applies across the country. While a common-law spouse may not inherit on intestacy, he or she may be entitled to make a claim for support/dependant’s relief.
There are several other negative factors to consider beyond the imposition of the arbitrary distribution scheme. These include:
- Where the deceased leaves a spouse and children, the spouse’s share may be less than what the deceased would have wanted to provide and may cause hardship for the spouse.
- The share of any minor children must be paid into court and held until they attain the age of majority. Upon attaining the age of majority, the share will be paid to the child, regardless of the amount. An application to court is required to obtain funds on behalf of the child in advance of the distribution date.
- The deceased forfeits the ability to appoint the executor of their choice.
- Without a will, parents in the common-law provinces lose the ability to appoint guardians for their minor children.
- There is no ability to establish testamentary trusts for special needs or minor beneficiaries, or to facilitate planning for a blended family or the succession of a business or the family cottage.
- Income tax and probate planning opportunities are lost.
- The administration of the estate may be more costly and take longer to complete.
The adverse consequences of dying intestate can be considerable, adding undue stress at a difficult time.
Your clients should be encouraged to prepare a comprehensive estate plan—including a will and powers of attorney—to ensure their testamentary wishes are upheld in a timely and cost-efficient manner.
Elaine Blades is an estate planning professional.