Simple Estate Planning for Everyone with Jennifer Leach Sandford, Pt. 1

Welcome to "Simple Estate Planning for Everyone," where we break down the complexities of estate planning so that everyone can understand and take control of their future.

Our guest Jennifer explains that a will is a document expressing an individual's wishes about what happens to their assets after their death, and it can be changed as long as the person has the capacity to make rational decisions. We also dive into planning techniques that can be used to ensure that one's wishes and instructions are met.

Did you know that if someone dies without a will, their assets are distributed based on provincial laws, which may not include relatives outside of certain degrees of separation? We discuss why it's important to have a will in place and how online will kits and paper wills may not always be the best option for more complicated estates.

Finally, we talk about when it may be necessary to review your will such as when life circumstances change like marriage or divorce, receiving an inheritance, or moving provinces. Tune in for all this and more!

Our Guest
Jennifer Leach Sandford, Horne Coupar LLP
Jennifer is a lawyer practicing in the areas of wills, estates, trusts, tax planning, and taxpayer representation.  She joined Horne Coupar LLP in 2021 prior to which she worked as an income tax and trusts lawyer in Montreal and Toronto for over fifteen years.  

Hosted by Glory Gray, BSc Finance, MFA

DOWNLOAD OUR FREE GUIDE
🔻12 Smart Questions to Ask When Interviewing a Wealth Advisor
https://www.glorygray.com/12-smart-questions-to-ask-your-wealth-advisor

Webinar: 📽 The Real Questions to Ask Before You Retire                https://www.glorygray.com/the-real-questions-to-ask-before-you-retire

Webinar: 📽 Building a Rich Retirement: The Social Network Equation               https://www.glorygray.com/rich-retirement-webinar

CONTACT us for a 👉 Free Wealth Consultation
https://www.glorygray.com/contact/#contact-form

GET STARTED! Fill out our 🍏 Client Application Form  https://www.glorygray.com/application-form

Website: GloryGray.com   
Facebook: @GloryGrayWealthSolutions 
Instagram: Glory Gray 

Transcript

Copy Transcript Copied

Hi, everyone, I’m Glory Gray, and welcome to the Women’s Wealth Canada Podcast. 

 When we produce these podcasts and blogs for you, we try to keep them short and sweet so you can gain valuable information, have time to digest it, and listen while you’re multitasking. (That’s right, I see you, I know you’re doing something else right now! No judgment! I get caught up on podcasts I listen to while I’m cooking and doing the dishes.)

 The topics we’re covering today are so important and there’s so much information that we’ve split it into two episodes for you. So be sure to come back next month when we share part two with you. And what’s this big topic? One of the most important topics I work with my clients on, Estate Planning for Everyone. 

 Joining me today is lawyer Jennifer Leach Sandford. Jen was a lawyer in Montreal and Toronto before joining Horne Coupar LLP in Victoria, BC. She specializes in wills, estates, trusts, tax planning and taxpayer representation. She is a regular contributor to the national newsletter of the Society of Estate and Trusts Practitioners Canada. She also co-authored a chapter on the subject of Estates and Adult Guardianship for the Continuing Legal Education Society of British Columbia. 

 Come listen in as Jennifer and I chat about Simple Estate Planning for Everyone.

***

Glory Gray  

So Jen, why does someone need a will?

Jennifer Leach Sandford  

I'd like to maybe step back and talk about what is a will. A will is a document that expresses your intention about what you want to do with your assets after you die. There are certain formalities required, but essentially you can give those instructions and change those instructions as many times as you like, as long as you have capacity until your death. 

So I guess there are two parts to that question, “why a will?” There are laws that help govern the division and administration of your assets, even if you don't have a will, which I think is something we're going to talk about later. But if you don't want to give your estate to your family, or you want to give some gifts to friends or to charities, or if you have stepchildren or foster children that you want to give part of your assets to, they would not be provided for under the intestate laws, intestate means dying without a will. 

And so if you intend to spread your estate and give a little bit to lots of people who have meant something to you, as a thank you, or just in recognition of the role and joy they brought to your life, then you should have a will. And that's one way that you can ensure that they will receive something as you intended. 

Glory Gray  

I had someone who said that a will makes things easier for the people you've left.

Jennifer Leach Sandford

If you have a good will! If you have a well-drafted will, it does. Unfortunately, you know, a lot of people have very simple wills, wills that are a page or two. And that can lead to a lot of confusion. If there's any vague language, it can create more problems. And I guess maybe I should just pause and say that you know, everybody has the freedom to make a will as long as they have capacity. And capacity means the ability to give instruction, and legal abilities. So if you've had a head injury, and you're not able to make rational decisions, you might not have legal capacity. But in general, as long as you have the capacity, you can make a will and decide what you want to do with your assets, and you can change your decision and you can change your mind. 

However, the laws in BC and in a number of jurisdictions across Canada will operate to protect some rights to your assets. So you might decide that you don't want to give any money to your children. Or you might say that at the end of your life, you choose to cut your wife out or your spouse out of your will. And if you do that, they have the ability to challenge your will in court and argue that they were not adequately provided for. And if the court determines that they were not adequately provided for, the court will change the terms of your will to provide a little bit more to either your spouse or your children. And so there are different things that you need to do to be able to ensure that you're meeting your obligation. And there are different planning techniques to make sure that your instructions are respected and limit the ability of your children and your spouse to challenge your will.

Glory Gray  

So we don't have to feel like there's nothing we can do. There are steps we can put in place ahead of time to ensure our wishes are met.

Jennifer Leach Sandford  

That's right, there are lots of planning techniques depending on the nature of your assets and the nature of the issue. There are things that you can put in place that ensure that your wishes and instructions are met. 

Glory Gray  

Let’s back up then. What happens if I don't have a will at all and I'm in “intestate" as you say?

Jennifer Leach Sandford  

Yes. So if you die without a will, there are very clear instructions. It's not that your estate will go to the government, although that could happen if you have no family. But generally what happens is the laws provide for a division of your assets between a spouse if you have one and your children if you have one. If you have one or more. 

There is an additional amount given to your spouse than to your children. And then it is in general an equal division after that preferential piece to your spouse, to your children. And if you don't have a spouse, if you don't have children, then they go beyond that. They look to parents up above, siblings, and they can go as far as cousins. For example, if you don't have any close family on your death and you don't have a will, the Act does not allow your estate to go beyond cousins. So the second cousin, they're not going to get anything. So even if you do have family,  the law does not always provide for them. 

In that case, your estate would go to the government, it becomes the government's property. There's only a certain number of degrees of distance from you, that they'll distribute it out to the family.

Glory Gray  

And then it just simply goes up for estate sale?

Jennifer Leach Sandford  

Yes, it goes to the government and it becomes part of the government's property. I believe they hold it for 10 years, just in case there is somebody who comes forward. And I had a situation like that, which is maybe helpful. A client, (not a client of ours - we didn't prepare the will), but they did have a will. And they provided for two cousins, to be the executor and to receive half of the residue, what was leftover in the estate. 

 Both of those cousins died before the will-maker. So the half that would have gone to those cousins is now going to go to the government. Because there were no siblings, no parents, no children, no spouse, and no grandparents. And although there are second cousins, children of the cousin, it's one step beyond what's permitted. So that particular gift fails, and it's gonna go to the government.

Glory Gray  

I can see that happening more often as we are living well into old age. There are a lot of centenarians on this island.

Jennifer Leach Sandford  

That's it. And so that's one of the things that you hope, a good lawyer or notary, whoever you choose to see for a will, is going to ask those questions. “Well, that's very nice. Do you want to provide for your cousin? And what happens if your cousin dies before you? Do you want it to go to their children? Do you want it to go with charity?” Those are the questions you need to prompt. Because people say “Oh, well, they're younger than me, they won't die, they won't die before me.” But things happen. Had they done that, the children of their cousins who are very much alive and would be very happy to have a portion of the estate would have benefited. But they won't because of the way that the will was drafted.

Glory Gray  

There are online will kits and paper will kits you can buy. But are there inherent problems in not using a lawyer or notary to prepare a will in light of these clauses that you're talking about?

Jennifer Leach Sandford  

I think lawyers are expensive. And I think that if you intend to provide for somebody other than your spouse and your children, but can't afford a lawyer, then there's nothing wrong with the will kit. There's nothing wrong with the online kit, they're going to prompt you to complete it and prepare it in a form that's acceptable by our probate courts. So I wouldn't say there's anything wrong with them. 

The problem is, if you have any significant assets, if you have a blended family, if there's any potential conflict in your family, which I mean, admittedly, how many families don't have conflict? That could be an issue. And although you're saving a few hundred dollars in the preparation of the will, that's just a couple of hours of lawyer time in the context of any kind of litigation against your estate. 

And so the fear that I have is that the estate is basically depleted by litigation. And the way that works is often that the executor is the person who is defending the claim on behalf of the estate that they're administering and their costs, their legal fees are all going to be covered by the estate. And so it can be ground down pretty quickly. 

So there's nothing wrong with a will kit. Absolutely not. But I will say unlike things like, you know, the online tax preparation software… I use that. It's very helpful. I wouldn't say that estate planning is a one-plus-one calculation. You're dealing with family, you're dealing with objects of sentimental value, as well as the financial value of your life savings. 

In general, I think most people want there to be no conflict after they die in respect of their estate, they don't want there to be infighting amongst their family. You know, as I said, a will kit is useful. And it gets the job done. And it'll have the proper formalities to be valid. But there is value in having a conversation with a good lawyer. 

A good lawyer is going to tease out the questions and the real issues, looking at your assets, looking at your family dynamics, you want to provide for yourself, but you also want to provide for your children and how do you do that? I don't know whether a will kit is going to be able to prompt you with that information. And I think that there are solutions, empathetic, careful solutions that a good lawyer is going to be able to suggest, for difficult family situations.

Glory Gray  

There's that family dynamic again. How often should one review their will or update it?

Jennifer Leach Sandford  

Generally, I would say, whenever there is a change in your circumstances. If you prepared a will while your children were young, when they've reached a majority, or when they're on the cusp of reaching a majority, that might be a time to revisit. If you get married, if you get divorced, if there's a change in your relationship, if there's a change in your health or your family's health, those would all be things that you might want to consider. If you've received an inheritance yourself. And what I mean by that is, you may wish to give everything to your spouse on your death. But maybe the inheritance you receive from your parents or from a family member, you would like to save that for your children so that the life that you've built together with your spouse, you share with your spouse, but the gift, the windfall that you received from a family member, maybe that's a legacy gift that goes down to the next generation.

Glory Gray  

I have some clients who move here from other provinces, and they ask if their will is going to still be good. They came here from Alberta, and now they're living in British Columbia. Is their will still good or do they need an amendment? 

Jennifer Leach Sandford  

The wills that are prepared in other jurisdictions are generally valid. What might need to happen though, is that depending on your asset mix, you might need to get probate in the jurisdiction where the will was situated and where you have some assets. And then what's called resealing it in the jurisdiction where you live. And it can delay the administration of your estate. 

I had a client who moved from another province. And when he came to me, he didn't have the capacity anymore to prepare a will and give instructions for a will. So his will from the other jurisdiction will have to do and it just is what it is. 

Glory Gray  

It used to be that when we were remarried, I believe or it might be divorced, and you can correct me on that, our previous will was no longer valid. Is there something to that?

Jennifer Leach Sandford  

It depends on the jurisdiction. In BC it's not the will that's invalid. But let's say you appoint your spouse as your executor and as your primary beneficiary. If you're divorced, or not even divorced, let's say separated, then the gift and the appointment as executor are null and void. So it's as if your ex-spouse has pre-deceased you and the gift other people are receiving is the same as the gift they’d receive after the death of your spouse. 

It doesn't mean that that spouse doesn't have any rights to your estate. They just don't have any rights under succession law, their rights would be under family law. 

So for example, we had a client who had a will and passed away. He was in the process of separating from his common-law spouse. They hadn't sorted out the division of assets and so on. So her rights to his estate were under family law. And so they had to sort out the family law issue but any gifts he had given to her in his will were voided. 

There's a caveat to that. If you are divorced or separated, let's say you are separated in July. And in September, you create a new will. And in that will you provide a gift to your ex-spouse? The courts would probably interpret that as being an intention to make a gift, even though you're separated. 

And again, a good lawyer is going to make that very clear in the will, make it clear that despite the fact that we've been separated, I still want to recognize my ex-spouse for the contributions they've made to my life. And this is the gift I'm intended to give to them.

Glory Gray  

So making it clear that it's not an oversight, it was an intention.

Jennifer Leach Sandford  

Yes, that is very key all the way through, I'll give an example. If you've got an asset where you designate a beneficiary, for example, in RRSP or RRIF. You say, on my death, it's to go to my children. Well, our law says that that passes outside the will, it's an automatic gift, and it doesn't go through your will. 

 But the courts have interpreted that differently. The courts have said, Well, we think that, in fact, that transfer was just to that person “in trust” for your estate. And really, they're just holding it and they should put it back into your estate to be administered according to your will. Which was not your intention when you created a designated beneficiary. 

So now our will makes it really clear that if I name any designated beneficiaries in my lifetime from now until my death, it was my intention that that be a gift and that passes outside my will. And we make that very clear in the will. 

The same with any joint assets. If you hold a house in joint tenancy, if you hold a joint account, we make that very clear, because the courts also have determined that if you transfer, if you hold an account and joint account with, for example, an adult child, the courts have interpreted that as being something where they say, well, the adult child was actually holding it for their parents as a convenience. And the intention was that that be administered under the estate. So it's not theirs personally on the death of the parent. 

Glory Gray  

That gives me some kind of comfort, the fact that you say that, that we can create these clauses. Because you know, we're going in and out of accounts all the time, right? 

You know, we have an RRSP here and a TFSA here, and we may have designated the beneficiary to go to our children. And you're saying that we can prepare the will properly to say, “when I do this in the future, this is what I meant.”

Jennifer Leach Sandford  

That's the language you use. “Any that I have now or anything I have designated in the future,” because obviously, our estate is changing all the time, we're using our money, we're contributing money, we're investing where we're growing our money, hopefully. And so the idea is, it's constantly in flux. And we're just saying, if I have designated beneficiaries, it's my intention that they go as a gift automatically, not through the will.

Glory Gray  

What is the role of the executor?

Jennifer Leach Sandford  

The executor’s job is to administer the estate in the broadest sense. They need to inventory all of the assets, those that are passing by the will, as well as the assets that have passed outside of the will, the joint assets, and the assets on which there was a designated beneficiary. They need to inventory all of them. They need to make sure that all of the debts are paid from the estate. 

They get probate if necessary. Probate is essentially proving the will, proving that the individual who has been named as executor is properly authorized and that what they're dealing with is the last will of the individual who has passed away. And then it's their job to administer the estate according to the will where possible.

There may be challenges to the will that lead to litigation or negotiation about how the estate should be distributed. And there is a great personal liability that attaches to acting as an executor. It's a huge responsibility. One, you're responsible for making sure that the debts get paid. And we recommend that people advertise for creditors. There's a way to do that. If you don't advertise for creditors, which provides a time limit for those creditors to come forward, if you don't advertise for creditors and you’ve distributed the estate, you will personally, as executor, be responsible for paying them back. 

In the same manner, if you make distributions to beneficiaries, because they're pressuring you, and they're saying, I just want my money, and you think that maybe you've paid all the taxes, but you're not quite sure, well, if you do make distributions, and it turns out that there is tax owed on the estate, again, the executor is personally liable for those taxes, as well as penalties as well as interest. 

The wills, you hope, provide for some indemnification for the executor. Because why would they ever take on this role if they're going to have to pay out of pocket and potentially lose their house because there are claims made against the estate that they can't satisfy? 

But it is a very serious job, and they need to make sure that they get good advice, good guidance from accountants, lawyers, and investment professionals to make sure that they're doing the right thing in administering the estate. So you need to choose your executor very carefully.

Glory Gray  

Does your firm sometimes take on those executor roles?

Jennifer Leach Sandford  

Yes. So law firms, estate law firms such as mine, do act as executors. Financial institutions also offer those services. Because this is a really thankless task, where there's family tension, or where multiple adult children that don't get along or don't have the skill set for being an executor. My recommendation, the gift I say that they can give to their family, is to hire or name a professional trustee to act as executor. Yes, it's probably more expensive. But chances are because this is what professional trustees do for a living, it'll be done efficiently and cost-effectively. 

And for the family or for the beneficiaries. If there is tension, they can point at the professional executor and be mad at them instead of within the family. Because there's always somebody who's looking over your shoulder saying “I could have done that better, I could have done that more efficiently, more cost-effectively.” And if you've got a professional, then, you know, they can be the bad guy. And it's okay, they can take it, they're being paid for that. 

Glory Gray  

I’ve had some clients ask me if their executor can be someone who lives in another country. 

Jennifer Leach Sandford  

So, that’s tricky. 

From a Canadian tax perspective, we would not recommend that. Essentially, your estate for income tax purposes is a trust. And the person administering your trust is considered the trustee. And the residence of the trustee determines the residence of the trust. So if all the decisions are being made by the trustee, let's say in England, then this is considered to be a non-resident trust. 

And there's an additional complication. For example, if you sell a house in the estate, the trustee will now need to get a clearance certificate, called a section 116 certificate, to sell the house that makes sure that the proper amount of taxes has been withheld and remitted to the government. It just adds a lot of complications. 

So where there are clients whose entire family lives outside of Canada, our recommendation is to name a professional trustee. It just makes it simpler.

Glory Gray  

And the thing for our listeners to remember is a professional trustee is an entity that's going to continue to belong beyond the lives of people that you might have stated as your executor.

Jennifer Leach Sandford  

That's a really good point. If you're choosing a firm or a financial institution, you have the comfort that if that particular individual with whom you had a relationship predeceases you or leaves the company, there's someone else to pick up the file and keep moving forward.

Glory Gray

That’s all for today, join us next time for the conclusion of my discussion with Jennifer Sanford on Simple Estate Planning for Everyone. We'll be talking about the important steps for you to take that protect you in your own lifetime. 

If this podcast helped you, please subscribe, leave us a positive review on Apple podcasts, and tell others about it so we can help them too.

Until next time, this is Glory Gray, your personal trainer for financial fitness telling you to take charge of your finances, plan for the future but most of all, enjoy today. Bye for now.

Out Guest
Jennifer Leach Sandford, Horne Coupar LLP
Jennifer is a lawyer practicing in the areas of wills, estates, trusts, tax planning, and taxpayer representation.  She joined Horne Coupar LLP in 2021 prior to which she worked as an income tax and trusts lawyer in Montreal and Toronto for over fifteen years.  Jennifer has a particular interest in using mediation in the context of estate disputes and was accredited as a civil mediator in Quebec.  She is a member of the Society of Estate and Trusts Practitioners (STEP) Canada and has contributed regularly to STEP Inside, the national newsletter.  Jennifer is presently pursuing her Trust and Estate Practitioner designation.  Jennifer and two colleagues authored the chapter: Wills, Trusts, Estates, and Adult Guardianship for the 2021 and 2022 Annual Review of Law & Practice, a publication of the Continuing Legal Education Society of British Columbia.  

This podcast is for informational purposes only and should not be construed as investment, tax or legal advice. It is not an offer to sell or buy or an endorsement, recommendation or sponsorship of any entity or security cited. Mutual funds offered through Portfolio Strategies Corporation. Other products and services provided through Glory Gray Wealth Solutions.