Illustration by Melanie Lambrick
If you have anything of value – whether it’s savings and investments, a vehicle, a home, heirlooms, other assets – or if you have a child or even a pet, you need a will. Why? If you die without one, the courts will decide who inherits your possessions and property based on the estate laws in your province, and you’ll have no say as to who ends up looking after your dependants (including the furry ones).
There are a few ways you can go about drawing up a legal will. You can hire an estate lawyer, use an online or printed will kit, or even write one by hand (in most parts of the country). Each method has its pros and cons, and there are some important things to know and look out for.
What is a will?
A last will and testament is a legal document that names the people (called beneficiaries) who will inherit your assets when you die and specifies who gets what. If you have minor children, a will also names their guardian(s) in the event both parents die at the same time. Furthermore, it must name an executor who will settle your estate according to the terms of your will.
When should I draw up a will?
Adults of any age can create a will, but most of us put it off because we don’t like to think about death. According to the 2019 Canadian Financial Capability Survey, only 22 per cent of Canadians under age 35 have a will. Though 95 per cent of Canadians aged 65 and older have a will, more than half (53 per cent) haven’t updated it in five years, which means it may no longer reflect their wishes. It’s important to update your will whenever you experience a major life milestone, such as getting married or divorced, having a child or grandchild, or buying a home or other real estate.
What is an executor?
An executor, also called an estate representative, estate trustee or liquidator, “executes” the instructions you’ve outlined in your will to wrap up your estate. It’s mostly an administrative role, which includes dealing with banks, insurance companies, government and tax agencies, as well as corresponding with the deceased’s beneficiaries and family members.
It can be a complicated and time-consuming task, so consider the “three T” rule when choosing an executor, advises Stephen Hsai, a Vancouver lawyer specializing in estate planning with Miller Thomson LLP. “The ideal executor should be someone you trust, who has the time to do the job, and who is in the territory,” he says.
The main issue with having a non-resident executor is that the taxman could then also consider the estate to be a non-resident of Canada, which could trigger negative tax consequences, such as loss of preferential capital gains and dividend tax treatments.
Why you might need to update the executor in your will as you get older
If you don’t have a family member or friend who would be a suitable (and willing) executor – or if you’d just rather save them the hassle of performing what personal finance columnist Rob Carrick suggests may be the “worst job ever” – hiring a corporate executor or trust company can be a good option. That goes double if you have a complicated or particularly large estate.
All executors, professional or not, are entitled to charge the estate for performing their duties. The will itself may not specify compensation, something beneficiaries may want to keep in mind, and the fees can vary – sometimes an executor doesn’t even take a fee. Courts in each province set a cap on allowable fees (in B.C. and Ontario it’s effectively 5 per cent of the estate), so it could end up costing an estate the same amount either way, says Darren Coleman, senior vice-president and portfolio manager at Raymond James in Toronto. “The reality is all the executors are entitled to the same level of compensation,” he says. “It is one of the rare circumstances where the professional and the amateur are the same price.”
What are the types of wills?
In addition to a last will and testament, you also need a living will. While a last will and testament spells out your wishes for when you die, a living will does the same for situations where you may be incapacitated from an accident or illness, and are therefore unable to make decisions about your personal care or finances.
A living will, sometimes called a personal directive, includes details on the type of life-prolonging health care treatments (e.g., defibrillator, respirator, surgery, etc.) and/or palliative care you’d want to receive; who you want to look after your kids while you’re incapacitated; and powers of attorney that legally name representatives to make financial and health decisions on your behalf.
Living wills and powers of attorney are effective only during a person’s lifetime and terminate at death, whereas a last will and testament comes into effect only after a person’s death.
What should a will cover?
A will focuses on the “who” and “how” of your estate, not so much on the “what.” In other words, it should include the names of your executor, guardian(s) for minor children, beneficiaries, and how you want your estate divided among your heirs. But unless there are specific items, such as family heirlooms, artwork, or jewellery that you want to gift to a particular beneficiary, there’s no need to itemize or mention your assets in your will.
That’s because most of your assets automatically become part of your estate when you die, and whatever remains after all debts and income taxes are paid by your estate will be distributed accordingly to your beneficiaries. You can certainly create a separate document with a list of assets and liabilities, account numbers, passwords, or anything else that you think will make it easier for the executor or your family to find the information they need after your death. However, this would be part of a larger estate plan (see below) and is not included in a legal will.
How to minimize the tax hit when you face the final curtain
Note that some assets, like a home that spouses own with joint tenancy, do not become part of the estate and are instead passed on directly to the other owner. Similarly, registered accounts that have separately named beneficiaries do not flow through the estate, as Rob Carrick explains in this excellent guide to naming a beneficiary of your TFSA, RRSP or RRIF.
These distinctions are important, because only assets that are in your estate are subject to administrative taxes, called probate fees. Such fees differ by province, but a lawyer or financial planner may be able to help you create an estate plan that considers factors such as joint tenancy or beneficiaries named on registered accounts to minimize the probate fees or income taxes owing on your estate at death.
So what is the difference between a will and an estate plan?
A will is a key component of an estate plan, but it’s just one part. An estate plan could also encompass powers of attorney, living wills, trusts, life insurance, information about how you’d like to be laid to rest, a net worth statement of liabilities and assets (including digital assets and crypto keys), and it often uses advanced tax planning strategies that can help minimize taxes at death.
Indeed, there are many situations in which estate planning can get tricky, such as when assets are held outside of Canada. “The fact is, tax systems in different jurisdictions can clash and create problems,” explains accountant, financial planner and regular Globe and Mail contributor Tim Cestnick, adding that we don’t have estate taxes in Canada; rather, we have income taxes. “Upon death you’ll be deemed to have sold most of what you own, which can create income taxes owing on capital gains if certain assets have appreciated in value. The problem that commonly exists is that you might pay income taxes in Canada at the time of your death, and perhaps estate taxes to another country on the same assets, with no relief for double-taxation, or triple taxation in some cases.”
In these cases, a tax lawyer, accountant or trust and estate practitioner can advise you on estate planning options to avoid paying more tax than necessary.
Can you write your own will in Canada?
Believe it or not, in all Canadian provinces and territories other than British Columbia and Prince Edward Island, you can put pen to paper and write a legal will by hand. A handwritten will, also known as a holographic will, must be on paper (no, the back of a napkin isn’t sufficient), in your own handwriting in pen (you can’t use a computer – or typewriter, if anyone still has one of those kicking around), and include your original signature. That’s all it needs to pass legal muster.
Are online kits for a will legal in Canada?
While a handwritten will is legally binding in most provinces, even the most ardent do-it-yourselfers would likely prefer some guidance as to what to include in a will and how to word it. That’s where pre-printed and online will kits come in. They handle the confusing legalese so all that’s left to do is add your personal details. Will kits are legal throughout Canada, so long as all the following criteria are met:
- The will is in paper format and has your original signature. Digital documents/signatures are not acceptable, so when using an online will service you need to print out the final will and sign it by hand. (Again, B.C. is an outlier here; it recently amended its legislation to allow digital signatures, using a platform such as DocuSign, and the will itself can be in a digital rather than paper format.)
- Two witnesses watched you sign the will, and then signed the document themselves. These must be third-party witnesses, which means they can’t be family or anyone else named in your will.
- You were an adult (age of majority in your province) of sound mind when you wrote the will.
Do you need a lawyer to make a will in Canada?
The short answer is no. You don’t need a lawyer’s assistance to create a will; you can do so on your own, as explained above. A better question, however, is should you hire a lawyer anyway?
If you have a complex estate (for example, maybe you’re a business owner or have multiple real estate holdings) or if your family situation is complicated (such as a blended family from previous marriages/divorces, or if one of your beneficiaries has a mental disability), it’s best to seek out the services of an estate lawyer. These situations are not easily addressed by will kits, which are really designed for simple, straightforward estates.
How much does a will cost?
That depends on which route you take.
- If you hire a lawyer, you’ll get professional advice, but you’ll pay a minimum of $800 and up to several thousand dollars if your estate is complicated.
- Online will kits are an increasingly popular option for those who want a no-frills will for a straightforward estate. Once you’ve decided who you want to name as your executor, beneficiaries, and guardians for minor children (if applicable), the online service will guide you through a user-friendly step-by-step process. The whole thing takes about 20 minutes; but to make the will legal (other than in B.C.), you must print out the document, sign it in front of two third-party witnesses, and have the witnesses sign as well.
There are now several providers in Canada (see below) with costs ranging from about $40 to $139 for a basic will; and package options that include powers of attorney. Some services also allow you to make changes to the will at any time with no further cost; however, you’ll have to print and sign (and get witnesses to sign) it again.
- Use a pre-printed will kit. These are similar to online will kits, but in a pre-printed fill-in-the-blank format, so it’s impossible to update – you’d have to start over from scratch with a new kit. You and two witnesses still need to sign the document for the will to be legal. The cost is under $40.
- Write it out by hand. This is the simplest option, and it’s free, other than the cost of the pen and paper.
Note that with any of these options, it’s incumbent upon you to safely store the original signed copy of your will – and let the executor know where they can find it after you die. You can also register the will and its location on CanadaWillRegistry.org, which can help an executor find the original will if they’ve forgotten where to look (or if you forgot to tell them). Some online services and lawyers will cover the $40 fee for the registry.
Four ways to create a will in Canada
What happens if someone in Canada passes away without a will?
Some people think if they die without a will – called dying intestate – their estate will automatically go to their spouse, children or next of kin. The truth is your estate might eventually go to those people, but that depends on the legislation in your provincial jurisdiction. In other words, the courts must determine who gets what, and in what proportions.
To make matters more complicated, the rules vary greatly between jurisdictions. For example, the statutes in some provinces dictate that if the deceased has no will, a common-law partner may inherit a significant portion or all of the estate, while in other provinces (including Ontario) a common-law partner is not entitled to receive anything at all.
All this decision-making by the courts takes time and money, which erodes the value of the estate – and keeps assets out of your loved ones’ hands for longer than necessary. Furthermore, the court will appoint the guardian(s) for any minor children, which may not be the same choice you’d have made yourself.
What’s the difference between a will and life insurance?
While a will and a life insurance policy may both be parts of an estate plan, they are different things with different purposes.
A life insurance policy provides beneficiaries with a tax-free lump-sum benefit upon your death. In general, life insurance is used to protect your dependants – such as a spouse or minor children – from financial hardship if you die during your working years while they are counting on your income to help pay for living expenses, a mortgage, and to save for the future (such as for retirement, or for your kids’ postsecondary education). Life insurance can also provide money for your funeral, which can be costly.
Because the death benefit is paid out tax-free, some people also use life insurance as a method to pass along wealth to the next generation in a tax-efficient manner. Furthermore, because the life insurance death benefit goes directly to the beneficiaries named on the policy rather than becoming part of the deceased’s estate, probate fees are avoided. Of course, the cost of life insurance goes up as you age, so those costs must be weighed against any potential tax savings.
If you don’t have dependants but are worried about family or others having the financial burden of paying for your funeral, you can make and pay for those arrangements in advance, which is likely far more cost effective than life insurance.
Where can you get a will online?
Here are some of the popular online will services in Canada:
Willful
- Offers wills, powers of attorney and living wills;
- Clients can also compile a list of assets and record funeral or burial wishes;
- Serves those with non-complex estates in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan.
Cost: $99 for an individual will; $189 for will, power of attorney and living will (or $329 per couple). All updates are free.
Epilogue Wills
- Provides basic wills and powers of attorney;
- Serves clients in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick, Nova Scotia and Prince Edward Island.
Cost: $139 for an individual will ($229 per couple); $179 for will and power of attorney ($289 per couple).
FormalWill.ca
- Offers wills, powers of attorney and living wills;
- Also has separate pet wills, to arrange care for your pets;
- Serves clients across Canada.
Cost: $59 for individual will; $39 each for power of attorney and living will; $59 for pet will; for an added fee ($149 to $249) you can have a lawyer review your will, power of attorney or living will. You can also subscribe to a bonus option (at the time of purchase) that allows you to make future updates to your will.
LegalWills.ca
- Provides wills, powers of attorney and living wills;
- Can also purchase a “life locker” that stores personal information, such as a list of your belongings, digital assets and important contacts, to be passed on to your family and executor.