Far too often people are of the opinion a Will is not required. This could not be further from reality. Wills can distribute your property, name an executor, name guardians for children, forgive debts and more. Having a will also means that you, rather than your province's or state's laws, decide who gets your property when you die.

 

In my July 9th The Importance of a Power of Attorney (PoA) article I addressed the need to have a PoA for Property and a PoA for Personal Care. These are two documents that stipulate your instructions on matters to be carried out, and by whom, while you are alive.

In that article I made reference to my March 17, 2018 Plan For The Unexpected – Organize Your Records article. The subject matter in that March 17^th article applies to PoAs and Wills; it is imperative detailed records be kept to enable your PoA and Executor to carry out your instructions while minimizing the risks of incorrectly carrying out your instructions and to minimize expenses.

Upon completion of that article I started composing this article but got side tracked.

As fate would have it, my wife and I have just returned from an out of town funeral for the brother of one of our closest friends.

Steve (name changed for confidentiality reasons) was extremely active in the community and ran multiple businesses. Steve had everything going for him…except his health.

As fate would have it, Steve returned home from an event and suffered a heart attack leaving his wife and son (early teens). At the age of 51, life was cut short.

This recent unfortunate event has spurred me to dust off the article I had started almost a month ago and to impress upon you the importance of having a current Will.

What is a Will?

A Will is a legal document that dictates how you want your assets to be distributed upon your passing. This document has no effect until you die, and therefore, it can be changed however often you deem necessary.

Having said this, a Will must comply with several requirements under provincial or state law including (but not limited to) the number of witnesses, whether it must be typed or handwritten, whether the Will was executed free of fraud, duress, undue influence or mistake, and if the party writing the Will knew he / she was writing a Will.

In essence, a Will includes specific directions on the distribution of assets after death, including provisions for any tangible personal property owned (ie. furniture, jewellery, etc.) and the naming of guardians for any minor children. This document should also indicate the sources to be used to pay any estate taxes and debts owing and name an Executor responsible for the settlement of the estate. A Will shall end with the signature of individual for whom the Will is created, the signatures of the appropriate required number of witnesses, and typically a notary public’s oath about the validity of the various signatures.

Although I am not a financial planner, I talk to people about the importance of having current PoAs and a current Will. I never cease to be amazed at how many people agree these documents are extremely important yet several months after our conversation these people have done nothing to have these documents drawn up.

Excuses, Excuses, Excuses

I have several financial advisors who read my articles. They discuss this subject matter far more often with clients and prospects than me and have shared several examples where they walk away from a conversation with a client / prospect and just shake their head. Here are a couple of examples.

1. An elderly lady recently attended a financial planning seminar. She informed the financial planner that she had not put a Will in place because she felt she would be signing her ‘own death warrant’.
2. A young client starting off her career told him she will ‘eat healthy and exercise’.  As a result, she has no intention of putting together a PoA and a Will even though her mother is a kidney transplant recipient.

Be Careful How that Will is Worded

As part of my research for this article I stumbled across the case of Brown v Du Frey. This is a comical, yet pathetic, example of how one individual went through the exercise of putting together a Will but because of improper legal advice, the manner in which the deceased party wanted her assets to be distributed took a whole different turn. Essentially, by disinheriting her spouse in her Will the deceased’s desired beneficiaries received a whole lot less than she had intended.

I do not wish for you to construe what is being presented as legal, tax, or investment advice. I just want you to keep this in mind when you structure your Will.

This case occurred in the 1950s in the State of New York.

In this case, the plaintiff's (John H. Browne) former wife, Florence E. Browne, executed her last will and testament on June 22, 1951 which contained the following paragraph:

‘I am mindful of the fact that I have made no provision for John H. Browne, my husband. I do so intentionally because of the fact that during my life time he abandoned me, made no provision for my support, treated me with complete indifference and did not display any affection or regard for me.’

On September 26, 1951, Florence E. Browne passed away.

On October 20, 1951, the New York Amsterdam News carried the following article on page one:

‘HUSBAND DESERTED HER; WOMAN BEQUEATHS FORTUNE TO CHURCH. LEAVES HUSBAND NOTHING.’

At the time, under the law of the State of New York, a wife could not disinherit her husband unless he had abandoned her or was guilty of cruel and inhuman treatment.

Mr. Brown was incensed at having been excluded from the Will and filed a libel suit against his late wife’s estate. His claim was that her statements were legally defamatory and he provided statements and receipts for her support and brought other live witness testimony from individuals claiming he did show her affection at various points during their marriage.

Mrs. Brown’s estate amounted to $10,000 of which her church was to have received the sum of $9,000, her sister was to have received $500, and an infant under 14 years of age was to have received $500.

In his libel claim, Mr. Brown was awarded $4,500 in damages against the estate of Florence Brown. Since the debts and obligations of an estate must be satisfied before any distributions are made to beneficiaries, Mr. Brown received $4,500; according to the US CPI Inflation Calculator this is equivalent to ~$43,281 as at June 2018.

After Mr. Brown received his $4,500, I do not know how the remaining $5,500 was allocated. All I know is that the beneficiaries reflected in Mrs. Brown’s Will received far less than she had intended.

Does That Will Reflect Your Intentions?

If the Brown case didn’t raise your eyebrows then perhaps this will.

In the late 1990s my wife and I were invited to visit an acquaintance who was ‘house sitting’. The ‘house’ was a penthouse suite in an exclusive condominium located in a highly desirable area of Toronto. The owner of the condominium had inherited her husband’s wealth upon his passing as his Will specifically left all his assets to her.

This widow also had the good fortune of having been previously married to another wealthy gentleman. His Will specified that all his assets should also be left to her. When they divorced, he never subsequently amended his Will so when he passed away she was still the sole beneficiary to his Estate.

Who Should Act as Your Executor?

Clearly, having a current and valid Will is important but who should act as Executor?

Not everyone has the aptitude to be an Executor. Furthermore, just because someone might have the aptitude to be an Executor does not mean they are prepared to assume that responsibility; please read my March 19, 2018 Executor – The Hardest Job For Which You Never Applied article.

My wife’s friend told me recently that a friend’s co-worker learned that she had been appointed as Executor of an Estate….after the person had passed away. Imagine…the deceased party had never asked this person whether she would be prepared to take on the responsibilities of Executor!

This person was not prepared to act as Executor and had to find someone else who would act in that capacity. In order to change Executor, the services of a lawyer (at a cost) were required.

Reasons to Appoint a Professional / Trust Company

If you have been named Executor please keep in mind the following 3 Rules.

Rule 1

As an Executor you do not become personally liable for the debts of the deceased.

Rule 2

You do become personally liable for all the debts you incur as Executor after the death of the deceased. If, for instance, you engage the services of external parties to help you in settling the estate (eg. movers, real estate agents, lawyers, accountants) you are responsible for ensuring these debts are paid.

Rule 3

This is the big one! You are liable for ensuring the debts of the deceased are handled properly. As Executor you are responsible for ensuring all the Estate’s creditors are treated equitably, and if possible, paid in full from the Estate. As Executor, you could be held personally liable if a creditor receives more as a percentage of their debt than other creditors (you cannot give preferential treatment to certain creditors). As Executor, you could be held personally liable if you distribute any of the Estate to beneficiaries without ensuring all creditors are first paid in full.

If you have been appointed Executor and are concerned about Rule 3, you can always engage the service of a Professional / Trust Company to assist you in carrying out your duties and responsibilities. Quite frankly, this is the route I am taking when my time comes to act as Executor of someone’s Estate (and winding up that person’s Estate is going to be relatively straightforward). I have never wound up an Estate and I am prepared to pay a third party.

I recognize some Estates are relatively simple and straightforward but if there is any element of complexity, or if the family dynamics are in a state of dysfunction, it may be wise to engage the services of a Professional / Trust Company who is experienced at settling Estates.

Fee Structure

Be prepared to pay fees if you engage the services of an external party that has experience in settling estates. The fee structure will likely be on a graduated scale.

A $20 Million Estate, for example, could have a fee structure wherein you pay a certain percentage on the first $1 Million, a smaller percentage on the next $1 Million, an even smaller percentage on the next $3 Million, and so on and so on. In essence, you’re looking at a sliding scale. In addition, there will likely also be a minimum fee but this would only kick in on smaller Estates.

The fee structure might also be dependent on whether the third party will be acting as PoA and Executor.

Furthermore, some Trust companies will have a reduced fee structure if all your investments are held with them.

As you can see, delving into the cost associated with engaging a third party is beyond the scope of this article. While you will be required to pay fees, those fees might well be worth it.

Final Thoughts

Hopefully you are not one of those ‘procrastinators’ and you have up to date PoAs and a Will. If you happen to fall in the camp of ‘procrastinators’ I hope this article has given you the incentive to take action.

When you do put your Will in place, please keep in mind Mrs. Brown!

Thanks for reading!

Note: I sincerely appreciate the time you took to read this article. Please send any feedback, corrections, or questions to [email protected]

Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.