Writing a will is an essential step in estate planning, yet many Canadians neglect to do so. In Ontario, the absence of a valid will can lead to complexities, uncertainties, and outcomes that may not align with your wishes. This blog explores what happens when someone dies “intestate” (without a will) in Ontario and highlights the importance of having a legally sound estate plan.
Understanding Intestacy
When a person dies without a will, their estate is distributed according to Ontario’s Succession Law Reform Act (SLRA). The law provides a clear framework for the distribution of assets, ensuring that family members inherit in a prescribed order of priority. While this process aims to create fairness, it may not reflect your personal wishes or family dynamics.
Consequences of Dying Intestate (Without a Will)
Dying “intestate”, or without a will, has several significant consequences. Firstly, it results in a loss of control over how your assets are distributed. The SLRA dictates the order of inheritance, potentially leading to outcomes that significantly differ from your desired distribution.
Intestacy can create significant friction among family members. If the SLRA doesn’t align with the deceased’s perceived intentions or family dynamics, disputes and disagreements over inheritance are likely to arise. This can lead to strained relationships, legal battles, and emotional distress for loved ones.
Furthermore, the SLRA may not adequately address unique family situations. For example, it may not recognize common-law spouses or provide for stepchildren or other important individuals to the deceased. The process of administering an estate without a will can also be complex and time-consuming. The court must appoint an estate trustee, which can involve legal proceedings and delays. This can significantly impact the timely distribution of assets to beneficiaries. The SLRA‘s order of inheritance may not always result in a fair or equitable distribution of assets. For example, younger children may receive less than older children, or a spouse may receive a smaller share than intended.
Order of Inheritance
The SLRA establishes a hierarchy of beneficiaries, with spouses and children generally receiving priority. While the following is a simplified overview (the actual distribution of an estate under intestacy law can be quite complex), it does provide a general idea of inheritance:
- If the deceased leaves a spouse and children, the spouse typically receives a portion of the estate, with the remaining portion divided among the children.
- If the deceased leaves a spouse and no children, the spouse usually inherits the entire estate.
- If the deceased leaves children and no spouse, the estate is typically divided equally among the children.
- If the deceased leaves no spouse or children, the estate may pass to parents, siblings, or more distant relatives, depending on the specific circumstances.
Married with Children
Dying intestate for married individuals with children in Ontario is a common occurrence and presents a number of issues and related questions regarding the distribution of an individual’s estate.
Distribution of Assets for Married Individuals with Children
When a married individual with children dies without a will, the distribution of their estate is governed by the Succession Law Reform Act (SLRA).
Spousal Share:
The surviving spouse generally receives a significant portion of the estate. The SLRA provides for a “preferential share” for the surviving spouse, which is a specific amount they are entitled to receive regardless of the overall value of the estate.
Section 45 of the SLRA outlines the spousal preferential share. Currently, it is set at $350,000 or one-third of the net estate, whichever is greater. (Note: This amount is subject to change through legislative amendments.)
Division Among Spouse and Children:
After the spouse receives their preferential share, the remaining portion of the estate (known as the “residue”) is typically divided between the spouse and the children. Generally, the spouse typically receives one-third of the residue, and the remaining two-thirds are divided equally among the children.
Example: If a married individual with two children dies intestate, and the net estate is $1,000,000:
- The spouse’s preferential share would be $350,000 (as it exceeds one-third of the estate).
The remaining $650,000 would be divided as follows:
- Spouse: $216,667 (one-third of the residue)
- Each child: $216,667 (two-thirds of the residue divided equally)
The Impact on Minor Children
If you have minor children, dying without a will introduces additional complications. Key concerns include:
Guardianship
Without a will, there is no clear direction regarding who should care for your minor children. The court will appoint a guardian, which may not align with your preferences. This decision is based on what the court deems to be in the child’s best interests, but it may exclude individuals you would have chosen. Moreover, the court process can be time-consuming and emotionally taxing for family members, potentially causing rifts among relatives who might have differing opinions on guardianship.
Planning for guardianship through a will allows you to name someone you trust to care for your children. It also provides an opportunity to explain your reasoning, ensuring your wishes are clear to both the guardian and the court.
Managing Their Inheritance
Children under 18 cannot legally manage their inheritance. Without a will, their inheritance is controlled by the Office of the Children’s Lawyer until they reach adulthood. This system, while protective, lacks flexibility. For instance, funds may not be readily accessible for specific needs, such as educational opportunities, medical treatments, or extracurricular activities that could enrich a child’s life.
By creating a will, you can establish a testamentary trust, appoint a trustee, and outline conditions for the use of funds. This approach ensures your children’s financial needs are met in a way that aligns with your values and priorities.
Assets Not Covered by Intestacy Laws
Certain assets are not governed by the SLRA, even if you die without a will. These include:
- Jointly Owned Assets: Assets held in joint tenancy (e.g., a home or bank account) pass directly to the surviving owner.
- Designated Beneficiary Accounts: Registered accounts like RRSPs, TFSAs, and life insurance policies with a named beneficiary bypass the estate.
- Pension Benefits: Many pensions allow for direct beneficiary designations, ensuring funds do not form part of the intestate estate.
While these mechanisms provide some protection, they cannot replace the comprehensive planning offered by a will.
Probate Delays and Costs
Dying without a will often leads to increased delays and legal expenses. Court involvement is necessary to:
- Appoint an estate trustee.
- Resolve disputes among potential heirs.
- Oversee the distribution process.
These delays can place significant financial and emotional burdens on your loved ones during an already challenging time.
Delays in Appointing an Estate Trustee
When someone dies intestate, no executor is pre-designated to handle the estate. This means that a family member or other interested party must apply to the court to be appointed as the Estate Trustee Without a Will. This process involves gathering documentation, filing court applications, and waiting for judicial approval. In some cases, multiple parties may contest the appointment, further delaying the process.
Strain on Beneficiaries
For families relying on the deceased’s assets for financial stability, such delays can create immediate hardships. Mortgage payments, education expenses, or daily living costs may become difficult to manage without timely access to inherited funds. Planning ahead by drafting a will can streamline the probate process, reducing both costs and emotional strain for your loved ones.
Disputes and Litigation
Intestacy increases the likelihood of family disputes, especially in complex family structures. Common areas of conflict include:
- Who should be appointed as estate trustee.
- The distribution of assets, particularly sentimental items.
- Claims from dependents or excluded individuals (e.g., common-law partners).
Ontario Estate Planning Lawyers Here to Help in Will and Estate Matters
While the SLRA provides a framework for estate distribution, it may not reflect your personal wishes or best serve the interests of your loved ones. To ensure your assets are distributed according to your desires and to minimize potential family disputes, it is crucial to create a valid will and engage in comprehensive estate planning.
Fortunately, at Bader Law, our skilled team of estate planning lawyers regularly work with clients in Mississauga, Oakville, and across Ontario to help them to develop, or amend, their estate plan. We will ensure that your assets, along with your physical property, are identified, preserved and incorporated into a well-rounded estate plan, so that you can ensure your loved ones will have access to all of your assets after your passing. To schedule a confidential consultation with one of our estate planning lawyers, contact us online or reach out to us by phone at (289) 652-9092.