Simple estate planning typically involves a valid Will, a Personal Directive and an Enduring Power of Attorney. These three documents are essential to ensure that, among other things:
- Your wishes are followed, either in the event of incapacity or after death;
- Your family and loved ones are properly taken care of; and
- The administration of your estate occurs as smoothly and as cost-effectively as possible.
In addition, there are many other potential consequences when a person dies or becomes incapacitated without having these documents in place
What is a Will and what happens when you don’t have a Will?
A Will is one or more written legal document(s) that establishes how a person’s property will be divided when the person dies. In Alberta, if a person dies without a Will, the Wills and Succession Act specifies that, in general, a deceased’s estate will be dealt with according to the following table:
|Married or common law, with no children||All of estate to spouse|
|Married or common law, with children||All of estate to spouse|
|Married or common law, with children from different relationships||One half of estate to spouse or adult interdependent partner, One half of estate split equally to children or issue|
|Not married or common law, with children||All of the estate divided equally amongst the children|
|Not married or common law, without children||All of the estate divided equally between parents or survivor|
|If no parents||All of the estate divided equally amongst brothers and sisters|
|If no brothers or sisters||All of the estate divided equally amongst nieces and nephews|
|If no nieces or nephews||All of the estate divided equally amongst your next of kin|
|If no next of kin||All of the estate to the Province of Alberta|
Some of the problems that may be created when you die without a Will are:
1. Your wishes concerning your spouse, children and assets spouse may not be followed:
- Your spouse may not receive the desired amount or too much;
- Your children may receive too much too young (their money is held in trust until they reach the age of majority, then they receive the total amount);
- Handicapped children may not receive enough for their care and support; and
- No control over which beneficiaries receive which assets.
2. There is no planning for tax reduction
3. No opportunity to select an executor for your estate:
- The executor looks after the administration of the estate. Without appointing an executor in your Will, the Court will appoint an administrator for your estate based on who applies, and that person may not be the person whom you would have chosen to administer your estate.
- Having an unintended administrator may create conflict within your surviving family, potentially leading to estate litigation and significant expenses.
4. No opportunity to select a guardian for your children:
- A guardian looks after the emotional and physical well-being of your children. In your Will you can appoint a guardian. Without appointing a guardian, the Court will appoint a guardian for your children based on who applies, and that person may not be the person whom you would have chosen to care for and protect your children.
- This point is particularly important where you may have concerns about your child’s other biological parent or want your spouse (who may be a custodial adult through second marriage but not your child’s biological parent) to be the guardian of your child.
What is a Personal Directive (PD) and what happens when you don’t have a PD?
A Personal Directive is a legal document that appoints a person or persons to make personal decisions for you if you cannot make your own decisions (due to illness, injury or incapacity). Once the appointment comes into effect, the person(s) you designated can make decisions on your behalf relating to any or all of the following: your health care; where you live; with whom you live and associate; your participation in social, educational and employment activities; and legal matters that do not concern your property and assets.
Without a Personal Directive, to make personal decisions on your behalf, a person must apply to the Court to become your Guardian. Unfortunately, the application process is cumbersome and requires the aid of a layer, resulting in extra expenses.
What is an Enduring Power of Attorney (EPA) and what happens when you don’t have an EPA?
An enduring power of attorney is a legal document that appoints a person or persons to manage your personal and financial property. An Enduring Power of Attorney typically does not come into effect until you lose capacity. Once the appointment comes into effect, the person(s) you designated can manage your financial affairs by, among other things: paying bills; depositing and investing your money; and maintaining or selling land and other property.
Without an Enduring Power of Attorney, to make financial decisions on your behalf, a person must apply to the Court to become your Trustee. Unfortunately, the application process is cumbersome and requires the aid of a layer, resulting in extra expenses. Additionally, until someone is appointed as your Trustee, no one will be able to manage your property or use the same for your care and support.
A Will, Personal Directive and an Enduring Power of Attorney that are out of date could create problems. Laws change, and personal and financial circumstances change. Accordingly, you should review these documents on a regular basis and especially after major life events (such as marriage, divorce, children, etc.) to make sure they still reflect your wishes.