Five Unexpected Consequences of Dying Without a Will in Ontario
Dying Without a Will Creates Needless Suffering and Financial Distress for Your Family
We spend our working lives building wealth and providing for our family so we can share joyful experiences, create enduring memories, and leave a legacy that endures. My family nourishes my spirit and brings my life joy and purpose. For many of us, family is what we value most in the world, and we’d do anything to protect them. So, do we?
Not so much, according to a report about estate planning published by the National Institute on Aging in collaboration with RBC Royal Trust. Their report* states that 52% of Canadians fail to protect their families by not creating a Will, also referred to as dying intestate.
I encourage you to read the report and discover the value of estate planning and having a Will.
Of course, no one intentionally chooses to cause distress for their loved ones, yet dying without a Will can unintentionally cause suffering and burden your bereaved family members beyond measure.
This blog will explore the five shocking and unexpected consequences of how dying without a Will in Ontario can leave your family vulnerable:
Table of Contents
Let’s take a closer look at each of these consequences and the impact on your family.
1. Ontario Government Decides Who Gets Your Assets
The biggest shock to most families is that they think if one spouse dies the other automatically inherits their assets. Unless those assets are jointly owned this is not the case in Ontario. Assets are distributed to beneficiaries according to the Succession Law Reform Act as follows:
- Spouse with no children – all assets are distributed to the spouse
- Spouse with children – the spouse receives $350,000 and the balance is divided equally between the spouse and the children, with the children’s portion held in trust
- Common law spouse with no children – assets are NOT distributed to the common law spouse and instead are distributed amongst the family
- Common law spouse with children – the common law spouse does NOT receive any assets. All assets are distributed between the children and deceased family
- No spouse and no children – the assets are distributed to surviving parents, and siblings if parents are deceased.
These distribution rules can come as a major surprise for spouses who believed they were the sole recipients of their spouse’s assets. And a shocking surprise for common law spouses who discover they receive nothing!
The Takeaway? You have no say who inherits your assets, nor do you have any say who becomes the administrator of your estate. It could be relatives you don’t know or like receiving your nest egg and deciding your funeral arrangements.
Learn more about Ontario’s distribution rules under the Succession Law Reform Act when someone dies without a Will.
Creating a basic Will online can be accomplished in just 30 minutes.
2. Your Loved Ones Will be Denied Access to Your Accounts to Pay Bills
When someone dies, all their accounts are frozen by their financial institutions until their Will is probated. Probate is the legal process that approves the appointment of the executor named in a valid Will. When there is no Will, the court must appoint an estate administrator, making the process much longer to complete.
A distraught father who had lost his son a month earlier called me for help. His son was in financial hot water in debt with two mortgages amounting to more than the value of his property. With no access to his son’s accounts the father was in the dark about any other assets or debt and could not pay his son’s mortgage or bills.
Because there was no Will naming an executor, the father would be required to apply to the court for a grant of administration, which he learned in the Greater Toronto Area would take at least 8 months. Once appointed as acting administrator of the estate he could file for probate, another couple of months, so he could gain access to his son’s accounts. So how was his son’s mortgage and bills to get paid in the meantime?
He had to decide if he wanted to hire professionals to settle the estate and risk his own money, or let the bank foreclose on the mortgage and hand the estate over to the Office of the Public Guardian and Trustee, which meant potentially waiting 2 to 3 years and receiving a reduced asset value when the estate was settled.
The Takeaway? His son’s failure to create a Will has put his grieving father in a tricky situation with tough choices to make – risk his own money to get the most value from his son’s estate, if any, or let the bank and government take over and hope for the best.
Learn about the estate trustee of last resort – The Office of the Public Guardian and Trustee.
Creating a Will online can cost less than $150 for an individual and $275 for a couple.
3. Asset Distribution Takes Longer and is More Costly
Not having a Will means significantly higher legal costs. And when a government agency is the estate administrator, settlement for a straightforward estate usually takes longer than the average timeframe of 12 to 18 months.
A couple of years ago I was one of 30 beneficiaries of my late aunt’s estate. I was surprised because I barely knew my Aunt Mary. She died without a Will and the Office of the Public Guardian and Trustee (OPGT) administered her estate. Because she was unmarried, had no children, and no living siblings, all my nieces and nephews were distributed her assets after any debts and taxes were paid.
My Aunt Mary was one of ten children and significant work was required by OPGT to research each siblings’ family to determine who was alive and an eligible beneficiary. The entire process took over three years to complete. That’s three years of administrative fees which included extensive research and correspondence with each of the siblings to document their family history.
I and the 29 other beneficiaries benefited greatly from learning so much about our family, but was this the best outcome and my Aunt Mary’s intention? I can’t help wondering if she may have had favourite nieces and nephews whom she would have preferred to inherit her estate. And, if she had named them in a Will, they would have received a much larger inheritance at least two years earlier.
The Takeaway? With a Will you know your assets will go to family members for whom you want to make a meaningful difference in their lives, instead of being distributed amongst relatives you barely know.
Creating a Will connects you with your purpose by identifying who you value and how you can enrich their lives after you’re gone.
4. Higher Estate Taxes Could be Required Leaving Less Inheritance for Your Family
The quote by Benjamin Franklin, “If you fail to plan, you are planning to fail.,” couldn’t be truer when it comes to your estate.
If you fail to plan, you are planning to fail.
When someone dies, all assets are considered sold at the date of death. That means, unless a plan was in place to manage estate taxes, your assets may be distributed inefficiently creating higher costs to your estate and less assets for your beneficiaries.
There are two types of tax when you die – probate (referred to as estate administration tax) and taxes calculated when doing the estate’s income tax returns. Both types of taxes can be significant depending on various factors. Learn more about probate and how probate costs are calculated
Probate is applicable to assets that flow through the estate. With proper planning, assets can bypass the estate avoiding probate fees. A few examples of smart planning:
- Designate beneficiaries for life insurance and investments enabling payments upon death to bypass the estate and go directly to your beneficiaries
- Make your principal residence joint tenancy with your spouse so the house will not become part of your estate
- Create a trust – where the assets flow through the trust and not the estate.
It’s important to consult a lawyer to better understand which of these strategies or others works best for your circumstances.
In addition to probate, taxes calculated for estate tax returns can take a big bite out of an estate’s assets. Since assets are considered by the government to be sold on the date of death, investments, and property, including real estate that is not your principal residence, could be subject to significant capital gains.
Accountants, financial advisors, insurance agents, and estate planners can provide invaluable expertise to help you create an estate plan to avoid as much tax as possible.
The Takeaway? You can hand over more estate taxes than necessary to the government or invest in professional advice to create an estate plan, including a Will, that leaves more money in your family’s pockets.
Creating a Will ensures you make critical decisions about your family’s financial security.
5. Your Childrens’ Care Could be Granted to Relatives You Never Would Have Chosen
No one wants to think the unthinkable, but accidents happen that can leave young children suddenly alone in the world without their parents. Their grief and fear of what will become of them is terrifying enough, but what if they also are handed over to the care of relatives they hardly know?
When you die without a Will, the decision of guardianship for your young children rests with a stranger – a court judge. This person has no knowledge of you or your families’ dynamics. They may not consider values that are important to you in the raising of your children. Considerations like your:
- Education goals
- Religious beliefs
- Political views
- Approach to health and wellness
- Approach to nurturing and discipline.
The judge may hand your children’s care over to a relative with the best intentions to do the right thing, but who may be incapable or unwilling to do right by the children according to your values and beliefs.
The Takeaway? Leaving your child’s guardianship decision in the hands of a stranger is one of the most significant and terrifying unintended consequences of dying without a Will.
Creating a Will makes sure you choose a guardian that is the right fit for your children’s wellbeing.
Conclusion
We spend our working lives building wealth and providing for our family so we can share joyful experiences, create enduring memories, and leave a legacy that endures. My hope is that these five unintended consequences of dying without a Will compels you to act now and create one that will protect your family from needless suffering and financial distress.
There are several affordable choices to create a simple, basic Will online in just 30 minutes. I invite you to take a few minutes to explore one of the reputable online companies, Epilogue, to see just how easy it is!. And, if you have a complex situation that requires more than a basic Will, there are many affordable estate lawyers to choose from.
Create your Will today. Your family is counting on you!
We Can Help
If you have no one to appoint as an executor or need someone to support your appointed executor, we can help. Learn more about our professional executor services.
Did you find this blog helpful? If yes, please share with family members or loved ones who have not yet created a Will. Help them learn about the perils of dying without a Will and how simple it is to create one to protect themselves and their families!
