Make Your Will Bulletproof

By Edward Olkovich, Originally published by CARP Magazine at 50Plus.ca

Can you make your will bulletproof? You can avoid some dangerous traps when you make a will by learning some of the potential pitfalls and the reasons why you must keep your will up to date. You need to know there is a difference between properly and badly prepared wills and why you should invest in professional advice.

Milestones in your life, such as the purchase of a home, marriage, having a child or death of a loved one, triggers a need to review, revise or make your will. But don’t expect you can make one yourself because your beneficiaries get along or you are not rich. You could end up like Alice who thought she had a simple estate and that her relatives could settle things among themselves.

Alice wrote out her own will that said her money in the bank went to her nieces and everything else went to her nephews. What happened when Alice passed away? The nieces thought that the money included bank GICs and bank mutual funds. The nephews said the money was only what was in the savings account. Everyone hired a lawyer and went to court to ask a judge to decide what Alice intended by using the word “money.”

The judge said legally the bank GICs and mutual funds were not money. Money was only what was in the bank account. The courts require that amateur and lawyer- prepared wills satisfy all the same legal formalities. So making your own will makes you responsible for its contents — and ignorance of the law is no excuse. The kicker for Alice was that since she made the mistake, her estate had to pay everyone’s legal bills.

So would Alice or you be safer to use a will kit? The danger with will kits is that they claim to be “legally approved.” Well, that’s hardly accurate. Only lawyers can express a legal opinion on a will after it is signed. Will kits or computer programs are not tamper-proof. They can’t prevent you from making a mistake filling out forms. What you end up with may never make a will legal. You could end up with a do- it- yourself disaster.

Should you use a will kit?
Wills set out who gets your stuff, who is in charge and who will be your backups in case your first choices are not available. The law does not require you to use a lawyer or notary to make a legal will. Sounds simple enough, but is it? Don’t kid yourself. Making a will involves the intersection of tax, family, estate, property and trust laws that most people do not consider.

Do-it-yourself (DIY) kits all contain disclaimers so you can’t hold the sellers responsible. Most people need advice, not only information, to make the right decisions. I’m a lawyer and make money from preparing wills, but I’ve seen so many disasters that I don’t believe you save money by doing it yourself.

When self help is no help

DIY wills are a courtroom lawyer’s dream because the problems they create provide a steady stream of legal work. Get experienced legal advice if you:

• need tax advice.
• have minor children.
• are in a second marriage.
• need advice about marriage contracts.
• have obligations to common-law partners.
• need a will with trusts to protect beneficiaries.
• live with assisted care or are recently ill or hospitalized.
• have substantial investments, a business or second home.

Are computer programs better?
Don wanted his favourite niece Sarah to repair and use his summer home before she would inherit it. He asked his neighbour, a computer guy, to help him with a will software program. Don read his will on the computer but did not check the printed version that left out the legal description for the property. Don told Sarah that he amended his will to leave her the summer property.

Acting on her uncle’s verbal promise, Sarah spent her money renovating the property. Unfortunately, when her uncle died, Sarah discovered how shaky that promise was. Don’s will did not properly describe the summer property she was to inherit. She had to hire a lawyer to sue Don’s estate because he never had his will checked by a lawyer.

Many of my clients admit they buy the will packages out of curiosity.

This is a sign that they are trying to do the right thing but not that they are going in the right direction. We all know where good intentions will take you.

Most will preparation packages don’t give you enough background information to understand your legal rights and obligations.

If you have minor children, spendthrift or disabled beneficiaries you may need someone to manage the inheritance for your beneficiaries. Your will can control the funds for loved ones, but this is too complex for most will packages to explain.

Bulletproof your will when you make or revise it and follow these steps.

Review what you have
I’m talking about more than listing your net worth here. You need to know what kind of assets you have and what is controlled by your will or passes outside of it, such as your RRSPs and RRIFs. For instance, if you have changed jobs or banks, your designated beneficiaries with your employer or the bank holding your RRSPs may not be current.

Your life insurance policies should normally be designated to go directly to a named beneficiary. This will help reduce probate costs and pass assets outside of your will unless you designate them to go to your estate.

Assets owned jointly with your spouse, such as your home, have benefits. The last surviving spouse will usually inherit such assets without probate problems. That benefit is not always available when you own assets with your children or third parties.

You risk losing control of the asset, and a child’s creditors or divorcing spouse can make claims to your property. As an alternative, you may want to pass your assets through your will. This gives you control of your property and may be the only reason children call you each Sunday.

Estimate your final tax bill
We all pay too much in taxes. Your will can allow you to set up trusts to defer and minimize income and probate taxes. If you have a business, substantial investments or a second home, you may not want your loved ones being forced to sell them. Your financial adviser can estimate your tax bill on death from these particular assets. Then your will can ensure you have money to pay the bill so your loved ones can keep that vacation property.

Cover your legal obligations
Should you not be able to do whatever you want with your money? Well, you would be surprised how many people have legal rights to share in your estate. The list includes your spouse, financial dependants and those you made promises to, including common-law partners. Any one of these individuals can be a creditor of your estate. If you ignore their rights, they could sue your estate or challenge your will. If that happens your estate can be frozen until the lawsuit is finished. Can you think of anything worse than paying for a three-year legal battle after you’re gone?

Your will is where you name guardians for your minor children or set up trust accounts to manage their inheritance until they are 21 or older. Don’t forget to deal with contingencies such as drafting a clause to deal with a situation in which the entire family perishes in a single accident.

Review your will each time your assets, beneficiaries or relationships change. Remember, a new marriage automatically revokes your will.

Wills reflect your overall estate plan
Don’t change your will without knowing how it affects your overall estate plan or you could create a mess. Norma wanted her favourite nephew Bill to inherit her house when she died. She wanted the remainder of her estate divided into two shares – one for charity, the other for relatives abroad.

When Norma made her will, she forgot she had already designated her life insurance policy (her only other major asset) to her relatives outside of her will.

When Norma died, her will only dealt with the house but not the life insurance. Bill, as her executor, could not use the life insurance proceeds to pay for her funeral, income taxes or probate costs totalling $50,000. Norma’s will was inconsistent with her overall estate plan covering all her assets. Bill was given her house in the will but had to mortgage it to pay the estate expenses.

Educate yourself
Do your homework. Read books on the basic estate planning principles before you pay a sudden unexpected visit to a hospital.

In emotionally charged situations, you are at your weakest and lowest point susceptible to making mistakes. In such cases, the law presumes you can be taken advantage of, and anyone who has a hand in helping you make your will must be aware of these dangers.

Wills are subject to court review and approval and can be contested so do not wait for an ambulance to arrive to revise your will.

Make sure you obtain information that is up to date and from responsible, reliable sources. Be careful searching the web for Canadian legal advice. Cyberspace is unsupervised and filled with unregulated individuals who pose as lawyers misrepresenting their qualifications.

How to find lawyers to help
Finding lawyers to help is another scary problem. Usually, you can get a list of names from financial planners, bank representatives or professionals. Go to the lawyers’ websites or enter their name in a Google search.

Check if the lawyer writes, speaks or teaches in this field. Get background information to conduct a telephone interview with the lawyer. Then assess fee information, experience and how suitable the lawyer is for your needs. In some provinces like Ontario lawyers are certified as specialists in the estates and trusts field.

When you spread the cost of a proper lawyer-prepared will over five to 10 years, it works out to pennies a day. Professionally prepared wills do not cost money; they save money. Consider them an investment to protect your family, just like the cost of insurance or a burglar alarm system.

Making a will is a legal document that takes more than your common sense. If the law were only common sense, why would we bother with lawyers and a court system? Professional help can avoid having your wealth wasted in a family war over your money after you’re gone.

Wills are the cornerstone of your estate plan, and you should expect to pay hundreds of dollars for a will. If you do not pay for a properly executed will now, you risk having loved ones paying thousands of dollars a day for lawyers to go to court. Use a lawyer to review, revise and make your will so you don’t put your wealth and loved ones in danger.

When should I update my will?

• Anyone mentioned in your will changes their name.
• Executors become unsuitable due to age or illness.
• Beneficiaries die or become incapacitated.
• You sell any specifically gifted property.
• You divorce, separate or enter common (law) relationships.
• You move to another jurisdiction.
• You purchase or inherit real estate in another jurisdiction.
• Your marriage automatically revokes any prior will.
• You have children, new step-children or grandchildren.
• You need a new guardian for minor children.