People often appoint their children as executors, who may then subsequently move from Canada for education, work or other purposes. While there’s no technical restriction on non-residents acting as executors of a will, it certainly adds complexity.shapecharge/iStockPhoto / Getty Images
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For many clients, preparing a will is considered as unpleasant as a root canal. If they have finally managed to complete a will, they often tuck it into a safe drawer that’s opened rarely.
But life happens, assets change and what made sense five years ago may no longer now. Thus, having an updated will that reflects one’s current life situation is just as important as having a will in the first place.
A review of a client’s existing will is often part of the intake process for advisors. Even for advisors with longstanding clients, reviewing a will should be a customary part of their client service offering. As such, here are four factors to consider when engaging in that review.
1. Change in marital status
In Ontario, it had long been the law that a marriage revoked a will. However, that law was changed as of Jan. 1, 2022. Now, a will survives marriage. However, for residents whose marriage took place before Jan. 1, 2022, the old law still applies. If they had a will at marriage, that will is no longer valid.
Regardless of the date of marriage, it remains crucial for those who marry to review their existing will and ensure it provides for their spouse sufficiently. Without a marriage contract – often referred to as a prenuptial agreement – that says otherwise, married spouses have certain financial obligations to each other upon death. It’s best to address these obligations in a will to avoid costly litigation after death.
For Ontarians, divorce doesn’t revoke a will. However, any gifts left to a divorced spouse are effectively ignored. The effect of separation on a will is a bit trickier. For the separation to affect a will, the separation has to run for three years from at least Jan. 1, 2022, or there has to be a formal step taken in the separation such as a valid separation agreement, an arbitration award or court order dealing with separation.
While these rules are complicated, it’s important to remember that any change in relationship is an important reason to consider an update to a will.
2. Executors moving from Canada
People often appoint their children as executors, who may then subsequently move from Canada for education, work or other purposes. While there’s no technical restriction on non-residents acting as executors of a will, it certainly adds complexity.
On a practical level, some Canadian financial services institutions require an executor to appear in person to open an estate account or to direct certain transactions.
From a more technical perspective, if the will creates a trust, say for minor beneficiaries, and the sole executor doesn’t live in Canada, the trust will be deemed resident in the jurisdiction in which the executor lives. This creates taxation issues in a jurisdiction different from where the will-maker lived and could result in double taxation, among other tax problems.
In addition, there are certain things that a non-resident executor cannot do as it relates to Canadian corporations held by an estate.
And if the executor is a U.S. resident, they will have U.S. disclosure requirements for the Canadian estate assets.
If a client is determined to have a non-resident as an executor, it’s best for that non-resident to act as one of three executors, along with a clause that allows for majority decision-making.
3. Beneficiaries who have disabilities
If a beneficiary is receiving disability government support (in Ontario, for example, these are part of the Ontario Disability Support Program), there’s certain planning that can be done to ensure those supports don’t stop.
In many provinces, including Ontario, if a recipient of disability benefits receives an inheritance, or has a right to an income stream, those assets or income may disentitle the beneficiary from the benefits of the program.
A will can create a special trust for these beneficiaries to preserve their entitlement to the disability support program. A will that doesn’t contain such a trust cannot be amended to include it after death.
4. Take stock of the testator’s assets
If specific assets included in a person’s will – such as a car, some jewellery, or a particular investment – have been sold or given away, updating a will is a good idea. If the will doesn’t state otherwise, the intended beneficiary receives nothing if the will-maker (known as the testator) gave away or sold the asset during their lifetime.
In the alternative, if a will was prepared when a will-maker’s asset base was different, it’s prudent to consider whether amendments are necessary to deal with newly acquired assets.
One of the best examples is the purchase of a family cottage or another vacation property, which is often dealt with separately in a will.
Jessica Feldman Chittley is partner at estate and family lawyers Bales Beall LLP in Toronto.
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