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Will planning

Ensure that you are aware of the advantages of a notarized will. The absence of a properly executed will at the time of death greatly diminishes the purpose of estate planning, because a will is the key element in the settlement of any estate. Did you know that if you die without leaving a will, the law decides to whom and in what proportions your assets will be divided?

Holographic Will

It must be entirely written and signed by hand by the testator. or dies.

 No validation by a witness is required for its authentication.

 The testator may or may not be the only person aware of its contents.

 The testator must nonetheless inform a friend or loved one of where the will is kept so that it can be found at the time of death.

 This will is often incomplete.

It requires verification by a notary or a court after the testator’s death, which can result in significant expense and delay.

Will before Witness

This type of will can be written by hand by the testator, but may also be written using a computer.

It’s possible to have it written by another person, as long as they are over age 18.

 To be legal, the will must be signed by the testator and two adult witnesses.

 If the document is written on a computer, the testator and the two witnesses must initial each of the pages for the will to be official.

 The testator must reveal the place where the document is kept so that it can be found at the time of death.

 This will involves a waiting period between the death and the liquidation of the estate.

 The writing of this will can give rise to different interpretations.

 This will also necessitate verification by a notary or a court after the testator’s death.

Notarized Will

This type of will is written by a notary who, in addition to knowing the importance of correct wording, advises clients so that they don’t forget anything in their will. It’s true that a notarized will is more expensive; however, the costs could prove to be very little compared to the court costs resulting from contesting the will.

 The notary, the testator, and the witnesses must sign the document to validate it.

 A notarized will leaves no ambiguity as to the interpretation of a client’s last wishes.

 The original document is kept in a safe place to guarantee its durability

 This will takes effect upon death.

 It ensures optimal estate and tax planning

What is the purpose of a Will?

 Your Last Will and Testament allows you to speak after you have passed away. It does absolutely nothing and has no powers whatsoever all the time you are alive. But as soon as you die your Will has two key functions: it allows you to make key appointments and it allows you to describe the distribution of your assets. These assets include money, possessions, houses, investments, everything that you own.

Will Planning Process

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Couples

 Under the Income Tax Act, couples in common-law partnerships are subject to the same legal rules as married couples. However, the Civil Code of Québec does not recognize common-law partners in legal devolution and estate law. The transfer of property to these spouses must therefore be expressly stated in the will, or they will receive nothing.

Probate Tax

No discussion of tax-planning of a will would be complete without a brief mention of probate tax (or, as it is referred to in Ontario, “estate administration tax”). In essence, probate planning is aimed at reducing the value of the estate that passes to the personal representative. Probate tax is proportional to the value of the estate, so the tower the value of the estate, the lower the probate tax that will be payable. Reducing the value of the estate can be achieved through the use of multiple wills and a variety of will substitutes. However, it is worth noting that many of the more popular probate planning techniques (such as transferring assets to an alter ego trust or into joint tenancy with the intended beneficiary) present significant potential pitfalls, not least of which is that they can hinder effective tax planning. For example:

  • if the bulk of a testator’s assets pass outside his/her estate to the intended beneficiaries, this will mean foregoing the use of one or more testamentary trusts to engage in postmortem income splitting:
    transferring assets into joint tenancy will result in a deemed disposition, possibly accelerating the recognition of capital gains; and
  • transferring assets to an alter ego or joint partner trust raises a host of tax issues, such as the fact that such trusts are taxed at the flat rate applicable to inter-vivos trusts rather than the marginal rates applicable to individuals and
  • testamentary trusts, and that any capital gains or losses realized on the deemed disposition of assets held in these trusts will be segregated from gains or losses taxable to the deceased in the year of death.

Taxation at Death

Heirs Spouse Children and others
Primary residence
None
None
Secondary residence (cottage)
None*
Capital gain or loss
Life insurance benefits
None
None
Non-registered investments (depends on the type of investment)
None*
Capital gain or loss
Registered investments
None*
Added to income of the deceased taxpayer
Office or rental property
None*
Recovery of amortization and capital gain or loss
*Rollover to spouse