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When you're single, a will makes sure your stuff goes to the right people
Part two of catching up on retirement, American-style is coming but I wanted to post this because of an Angus Reid poll that came out today. It found that half of Canadians don’t have a will. Americans aren’t much better, with two-thirds not having a will and estate plan.
The main reasons for not having a will are:
They don’t want to think about the inevitability of death
They don’t have assets to warrant a will
Which, I understand, but wills aren’t just about big assets like property, cars or massive art or jewellery collections. What if you have a pet or a carefully curated vintage clothing collection? What’s going to happen to them?
Having a will means you’ve made a plan. (I’m pretty sure my youngest nibling has their eye on my wardrobe.)
As you’ll see in the article below, wills are used to ensure your wishes are followed after your death and, for what they can offer, aren’t that expensive.
We’re going to talk about wills this week. Yes, I know you probably don’t want to read about them because it means you’re going to die but guess what? You’re going to die anyway and when you’re single, you want to make sure the right people get your things and money, even if it’s what is in your bank account and your beloved pet.
Why? Because you should have some say over how you want your assets distributed instead of letting the government formula figure it out. (Yes, there are government formulas for both Canada and the U.S. It varies by province and by state. Do your reading.)
I finally decided to get a will in the last year. I’m not the only one who has been thinking about this. I’ve seen an uptick among my friends interested in getting wills so I reached out to a couple of experts to ask them about why single people should have wills.
Wills, according to Robin Hammond, founder and sole proprietor of a boutique firm, 12th Mile Law, are legal documents that determine who becomes your legal representative (estate trustee and executor) after you die. “It disposes of your property in the manner of your choosing,” she says, pointing out the freedom to give away your assets as you wish is, however, limited by law which may give people in specific relationships to you (i.e., married spouses, some family member dependents) a claim to part of your estate.
Why do single people need a will? Do all single people need one?
Without a will, the laws of Ontario* will determine who has a right to be your estate trustee after you die, as well as who shares in your estate and in what division, Hammond says.
Under these laws, only married spouses, blood relatives and legally adopted children are automatic beneficiaries of your estate. Common law spouses are not recognized as automatic beneficiaries, although they may apply to the court to be your estate trustee or make a claim on your estate in court. These automatic laws say that if you aren't legally married and you don't have any family, (not even remote family) your estate will "escheat to the Crown" becoming the property of the government.
If you aren't satisfied with the person the law says can be your estate trustee or the way the law will divide up your estate, you need a will. This is often the case for single people who have important relationships that they want to recognize that fall outside of legal marriage or blood ties. Some single people feel strongly about excluding blood relatives entirely in favour of their chosen family, and a will can often achieve this goal.
Wills can be contested but it is an expensive process as I talk about here.
A will may also offer some of the same advantages to single people as it does to spouses, such as tax planning strategies and succession planning strategies for people who have business interests.
What should a will cover?
At a minimum, a will names your estate trustee, and sets out who benefits under your will and how, in legally tested language. However, there are many essential details that a professional will include in your will to make your intent clearer from a legal perspective and to make it easier and less risky for the estate trustee to complete your instructions. A professionally drafted will can also include powers and clauses that allow the estate trustee to make the most of your assets from a financial perspective.
Wills also often include trusts. Examples of these trusts are those for minors, trusts to benefit persons receiving government financial support who would lose entitlement to that support if they inherited directly, or trusts to benefit people who would burn through the money if they inherited it directly.
For the cuspy singles, changes were made
For the "cusp" single people out there: There are a few recent changes to wills and estates law. As of January 2022, people separated for at least three years no longer have property rights, including in the situation where your spouse dies without a will.
And on the other end of things, if you're heading into marriage, you might be surprised to learn that the law has been changed so that marriage will no longer revoke an existing will. Best find out if your intended has an old will leaving everything to their favourite charity.
Friends and charity
Erin Bury, cofounder of Willful also mentioned a few things that didn’t occur to me. Having a will, she explains, puts you in the driver’s seat. “It doesn't leave it up to that provincial formula and when you're single, you may be really apt to give something to a charity if you don't have children. You might really want to leave something to a really close friend and that also wouldn't be accounted for in the formula.”
Caring for furry friends
Another reason to have a will is pets. Bury says that pets are a big part of wills, at least for people who choose Willful. “Their pet is really the most important thing to them so with a will you can leave money for their care. Even if you have a cat, leaving a couple $1,000 for their vet bills or food in the will is helpful.” What happens and one of the top reasons pets end up in shelters, she says, is their owner passes away, they haven't talked to anybody, and nobody wants to claim the pet so it ends up in a shelter.
Newly single? Time to update some stuff
The one mistake people make, says Bury, is forgetting to update life insurance, RRSPs, pensions or any accounts that have a beneficiary name directly on them. “They don't give a shit if you were divorced,” she says. “If your ex or your parents are named on the account, they're getting that life insurance policy.” Bury says that updating your will should also include removing your ex from your life insurance policy, your RRSP and any joint bank accounts that you have because if you passed away those joint assets would just transfer right over to them. “If they're also on the account, those policies would pay out directly to them.”
Wills aren’t just for rich people or even the middling class. If you have something that you want to leave to a friend or a charity, having a will lays it out. You’ll be gone but your final financial plan is in place with your will.
*Robin Hammond is based in Ontario. Please check your province or state for estate laws.
This week’s readings:
Could be as early as April 1. Banks could make the tax-free First Homebuyers Savings Account (FHSA) available this spring (Investment Executive)