Estate Planning: Six Reasons Why an Update May be in Order

Many people don’t start thinking about their estate plan until they are thinking of retirement, or see will writing as a ‘set and forget it’ exercise. Will writing can be a long, tiring and emotionally stressful process and as a result most will-writers prefer not to think about the document once it’s been done. Unfortunately, lack of timely updates can create discrepancies between the terms of one’s will and their true intentions at the time of their death. Everyone’s life changes over time, often unexpectedly, and it’s normal to forget to reflect these changes in estate plans and make updates accordingly. It is good practice to review a will and estate plan annually to ensure that everything is up-to-date and accurately reflects how the will writer intends to distribute their estate. For more on this, read our blog on what to do after a will is written. If you haven’t written a will yet, read our blog post on why you should have a will and the benefits of having one.

If, as a result of your review, changes to your estate plan are needed, there are two main ways of making modifications: writing a codicil and writing a new will. Each option has different benefits depending on your individual circumstances. While it might sound burdensome to re-write a will or draft a codicil, it’s often much easier than it sounds. Usually, the new will is very similar to the original and simply incorporates the few changes that the writer wishes to make. For more information, read our blog on how to make a revision to your will.

In addition to a will, there are other components to a well thought out estate plan that should also be considered, including:

• A power of attorney – appointing an individual with the legal right to manage your legal or financial affairs in case you are unable to;
• A healthcare proxy or representation agreement – this enables someone to make healthcare decisions on behalf of someone else if they’re incapable; and,
• An insurance coverage review – terms of a will do not automatically apply to property such as life insurance, RRSPs, RRIFs and TFSAs (if the accounts have named beneficiaries).

Some of the most common life events that require a will to be modified are as follows:

1. Birth of a Child

Arguably the most significant life-altering event in someone’s life is the birth of a child. Parents can become so busy with their newborns that they completely forget to update their will to reflect this important change. This can be true in the case of grandchildren being born as well. While the succession of the estate may seem obvious, it’s always best to express your exact intentions in a will, particularly if you have multiple children who you’d like to inherit different assets. Parents or guardians of minor children should appoint a guardian to take care of their children in the event of their death. A guardian is someone who would be the legal caretaker for the children until they reach the age of majority .

2. Marriage and Divorce

Spouses are typically the most prominent beneficiary in their partner’s will. Following a marriage, separation or divorce, people should clearly reflect their change of marital status in their will. Many spouses choose to form a joint or mutual will which means that the first person to die will have their entire estate transferred to their spouse. Once the other spouse dies, then the estate will be distributed according to their will. Keep in mind that someone who has lived in a “marriage-like” relationship with someone for two or more years may have rights for spousal support as if the couple were legally married. For more information, read our blog on spouses.

3. Receipt of an Inheritance

If a person has recently inherited a piece of an estate from a family member or friend, they should modify their will to reflect their ownership of this asset, particularly if it is of high value. Not including a large asset in the will can risk the asset falling intestate and being distributed according to intestacy laws. While this doesn’t sound like a serious problem, it can lead to your estate being divided contrary to your true testamentary wishes.

4. Business Creation and Sale

All business owners should revise their wills to reflect their share of a company when they start a business, and remember to keep the document up to date if their relationship with the company changes. Sometimes, parents want to give full control of their business to a single child as their other children went on to follow other career paths. A common way to do this is to specify that one child will buy their siblings’ shares of the company, so the transaction is fair for all of the children.

5. Tax Legislation Changes

Tax laws change often, and it’s not uncommon for people to be unaware of tax advantages that can be realized by revising how an estate is distributed. Checking with estate planning professionals can ensure that your will is up to date and maximizes the potential value of your estate under current tax legislation.

6. Death of Named Beneficiaries

The people named in a will can potentially die before the will writer does. In this situation, the will writer should take the time to re-distribute the estate to other family members or friends, or the asset could be distributed according to the rules of intestacy.

What You Should Do Now

It is not difficult to make a change to your will after going through a life-altering event like those mentioned above, however it can be easy to get caught up in the excitement or despair of these events and forget about the consequences that they have on a person’s estate plan. Consistently reviewing and thinking about your estate plan is incredibly important in planning for the future and can ensure that your will and related documents will uphold your true intentions at the time of your death.

Looking for more information? Read our page on the basics of estate planning.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.