Client profile

Amira Ghosh*, 34, has died unexpectedly of a brain aneurysm. A successful computer programmer, Amira had $10,000 in a bank account, $50,000 in a TFSA (with her mother named as beneficiary), a defined benefit pension with no named beneficiary (she joined a few years ago and forgot), and a condo worth $600,000 (mortgaged) in Mississauga, Ont.

*This is a hypothetical scenario. Any resemblance to real persons is coincidental.

The situation

Amira didn’t have a will. Unmarried and without children, she didn’t think she needed one. She and Rebecca, her girlfriend of two years, had talked about moving in together. Amira’s parents are both still alive—her father, Amitav, is retired; her mother, Helen, works as a high-school vice-principal—and they, like Amira’s older brother, Gavin, are understandably devastated. Because Amira didn’t leave a will, Amitav and Helen don’t know what she wanted to do with her assets. It never occurred to anyone that Amira would predecease her parents. What happens now?

The issues

“People tend to see wills and POAs as things to do when they’re older,” says Elaine Blades, an estate planning professional at RBC Wealth Management in Toronto. “But people die for a number of reasons, and not necessarily of old age. Everybody should have a will,” particularly those with at least $50,000 in assets.

In this situation, Amira’s loved ones are left with several questions.

Who gets Amira’s assets?

Provincial legislation sets out what happens when someone dies intestate. In Ontario, the Succession Law Reform Act distributes assets according to the deceased’s family situation at the time of death.

If Amira had been married, her spouse would have received all her assets. If she and her spouse had one child, the spouse would have received $200,000 and half of any amount above that, with the child receiving the other half. (If Amira had less than $200,000, the spouse would have received the entire estate amount.)

Since Amira was single in the eyes of the law, next in line to inherit are her parents, who will receive her entire estate. Gavin is not entitled to anything, although he would be next in line if Amitav and Helen had predeceased Amira.

What about Rebecca? Even if she met the definition of a common-law spouse (in Ontario, living together for three or more years in a conjugal relationship, or one year with a child) Rebecca still would not be entitled to any part of the estate, as Ontario law does not entitle common-law spouses to a distribution on intestacy.

Accessing the estate

Amira’s family must decide who will act as the estate administrator (a.k.a. executor). Given that the administrator is generally someone with an interest in the estate, says Blades, “in this case, it would most likely be one of Amira’s parents.” Since Helen works full time, Amitav takes on this role.

For Amitav to legally act as estate administrator and trustee, he needs an estate lawyer to help him apply to the courts for a Certificate of Appointment of Estate Trustee without a Will in Ontario.

The exception, says Blades, is the TFSA. As a registered asset with a named beneficiary—in this case, Helen—the $50,000 in the TFSA flows outside the estate and can be transferred to Helen upon proof of Amira’s death. This would be the case with or without a valid will, though the will can override this by naming someone besides Helen as the TFSA beneficiary. And, had Amira named a beneficiary for her pension, that money would have also gone directly to that person. Because she didn’t, the plan value goes to the estate.

degree of difficulty: easy to moderate

The relative simplicity of Amira’s estate makes it is a straightforward case. As sole legal beneficiaries, Helen and Amitav don’t have to deal with conflicts or liabilities that executors might face with multiple beneficiaries. Still, Blades points out, the process “would have gone more smoothly if Amira had left a will.”

Before applying for the certificate, Amitav will need to get a valuation of Amira’s estate and pay the Estate Administration Tax of roughly 1.5%. Once the certificate is issued, Amitav can redeem, sell or transfer assets.

In addition to planning and paying for Amira’s funeral, Helen and Amitav will need to complete administrative tasks like cancelling their daughter’s driver’s licence, health card, credit cards and any other memberships and subscriptions, and applying for the CPP death benefit. They’ll need to notify Amira’s employer about the death and determine what salary and benefits, including Amira’s pension and life insurance, are owed to the estate.

Amira’s parents also need to decide whether to advertise for creditors in case she owed anyone money. Creditors in Ontario generally have two years to file a claim against the estate; if a valid creditor came out of the woodwork during this period, Amitav as executor would be personally liable for the debt. After that, a creditor could sue Amitav and Helen as beneficiaries for the amount.

Even though they’re fairly certain Amira has no other debts, advertising is still necessary, says Blades, or else they have to wait one year before they can distribute the estate. Fortunately, as sole beneficiaries of Amira’s estate, her parents don’t have to worry about another beneficiary coming forward.

Once her assets are redeemed and any debts paid, Amitav is responsible for ensuring his daughter’s final tax return (and any other outstanding returns) are filed. He should also obtain a tax clearance certificate from CRA proving her estate owes no more tax.

What about the condo?

As estate administrator, Amitav’s duties include identifying and paying all legitimate debts and ongoing expenses of the estate—including Amira’s mortgage and condo fees or necessary utilities. Here, the TFSA comes in handy. Without it, says Blades, Amitav would have to delay payment or fund those expenses out of pocket until he obtained the certificate of appointment.

Right away, they need to enter and secure the condo, clear out perishables from the fridge, change the locks, water the plants, notify the condo administration and Amira’s home insurance provider that the property is vacant, and cancel unnecessary utilities like internet service.

For this, Helen and Amitav turn to Rebecca, who has spare keys and a rough idea of where Amira kept important documents, as well as knowledge of her subscriptions, accounts and passwords. With Rebecca’s help, Helen and Amitav cancel or memorialize their daughter’s Facebook and other social media profiles.

A death certificate in place, Helen and Amitav’s lawyer can prepare real estate documents necessary to transfer the condo to the estate trustee for a sale, and transfer any proceeds from the sale to the estate.

The solution

Amira’s parents engage an estate lawyer to guide them through the process. Even where there is a will, says Blades, it’s the best approach to ensure things are done properly.

As beneficiaries, Helen and Amitav aren’t required to distribute Amira’s assets to anyone else. But, they’re free to do what they’d like once they become legal owners. They should take caution, says Blades, not to distribute anything until all liabilities (including income taxes) have been settled.

In accordance with what they imagine their daughter wanted, Helen and Amitav give $15,000 in Amira’s name to each of her two nieces in the form of RESP contributions. In addition to keepsakes from Amira’s apartment, they transfer ownership of Amira’s car to Rebecca.

Client acceptance

Amira’s parents acknowledge that dying intestate has meant some extra work for them in administering her estate, and they’re grateful it’s still relatively uncomplicated. They make sure their wills and estate plans are up to date and insist that Gavin and his wife do the same. Overall, however, the minor complications of the intestacy pale in comparison to the loss of their daughter.

Susan Goldberg is a financial journalist based in Thunder Bay, Ont.