Why You May Need Two Wills in Ontario

Published on 29 August 2022, 07:22:56 AM

You’re no millionaire. Then why have two wills? Simply put, because your will and estate are more complex than you think. In fact, you probably already have two “wills”: the personal will you made by hand or with a lawyer and assets you plan to leave directly to others.

Quick Access to Your Assets

Having two wills reduces probate taxes your estate pays when you die. Instead of your full estate being tied up in a single will, you can give assets to beneficiaries without making them wait weeks, months or even years for your estate to be probated or settled.

Listing Beneficiaries to Save Probate Taxes

Everytime you add a beneficiary to a life insurance policy, pension plan or other non-property asset, you are deciding who inherits. Depending on who the heir is, some assets that list beneficiaries are tax free, forever or their lifetime. Making someone a beneficiary is as easy as filling out a form when you open the plan. Beneficiaries can be added or deleted later if you  change your mind.

Hold Assets Outside an Ontario Will

Assets you can hold outside your personal will in Ontario include:

• life insurance policies, which are tax free and creditor-proof
• RRSPs, left tax free to a dependant or spouse (married or common-law), but otherwise taxable
• RRIFs, left tax free to a successor who is a spouse or common-law partner — otherwise they are taxable
• TFSAs — ask your lawyer about their tax status
• pension plan benefits
• joint bank accounts with a spouse
• jointly owned investments, left to a spouse or dependant tax-free during their lifetime
• segregated funds and guaranteed interest options purchased from an insurance agent.

Assets like land, homes, intellectual property (a book you wrote, patent or invention), possessions like furniture, jewellery or art and digital assets like emails and social media accounts are included in your will and estate.

Name a Beneficiary in Ontario

A spouse, adopted or natural children over 18, dependants like parents or family members, a friend or a charity can be beneficiaries of non-property assets. You can split assets between beneficiaries, in any percentage you desire.

Name Minor Children as Beneficiaries

A child under 18 cannot be named directly as a beneficiary. Instead, create an Ontario family trust or estate guardian to receive and manage their money until they mature. You can keep money for a child in a family trust as long as you want, even after they turn 19.

Traps to Watch Out For

• While making every asset probate proof would work to your advantage, the CRA (Canada Revenue Agency) is ahead of you. A RRSP or RRIF left to anyone other than a spouse or dependant is taxable, even if the heir is named directly. Income taxes can be as much as 50% of the assets’ value, payable by your estate. Ask an Axess Law wills and estates lawyer before you assume you have found a tax break.
• Creditors may be able to trace assets not in your will. Leave some money in your will to pay creditors, estate administration taxes (estimate 1.5% of your estate’s value), your trustee and income taxes or your estate will be bankrupt. 
• A beneficiary who doesn’t share assets with others, as you directed, can cause legal problems. Be sure the beneficiary you list is the heir you want to receive the funds. 
• The estate trustee is not a beneficiary. Your heirs lose out if the estate trustee uses the funds for their own purposes. 
• Don’t leave your estate open to lawsuits. Ask our Ontario lawyers if a financial advisor’s recommendations seem vague or make you uncomfortable.
• Beneficiary information can be outdated if an heir dies or falls out of favour. Be sure to review your estate plans regularly. Keep insurers and financial institutions updated when  your plans change. The document you signed most recently will be used to distribute your assets.

Name Your Estate as Beneficiary

Naming your estate as beneficiary is easy, but makes all your assets subject to estate administration taxes. Taxes are charged on the total value of your estate (all property, possessions and financial assets in it). Creditors can also make claims against your estate, leaving less for heirs. Since your personal representative must apply to an Ontario probate court to begin administering your estate, your heirs will wait longer to inherit. 

Make a Separate Will for Out of Country Property

Times shares or a rental condo abroad or in the U.S. call for a separate will. Ontario law only applies in this province. Creating a second or third will makes life easier for your estate trustee. They can probate the will separately and pay taxes as they arise. You have the assurance of knowing your separate will is valid and enforceable.

Get Legal Advice to Change Your Will 

Axess Law’s Ontario wills and estate lawyers can advise you on minimizing estate taxes. Make an appointment by calling toll free to 1-877-552-9377 or 647-479-0118 in Toronto or use our online booking form. Video conference with a lawyer 7 days a week, day or evening, throughout Ontario. Licensed lawyers can meet in person with you at our Ottawa, Toronto, Scarborough, Etobicoke, Vaughan, Mississauga Winston Churchill or Mississauga Heartland law offices. 
Click here to learn more about Axess Law’s wills and estate services.