Step 1: gather the facts

A good estate plan can only be built on a proper foundation of facts. It is crucial to gather key information about:

• your assets, including values and precise ownership (sole, joint, trust …)
• your obligations, including fixed debts, commitments, and future legal requirements
• your family,
• your commitments
• your goals and expectations.

Fact gathering is a crucial part of the estate planning process. The better we understand the facts, the better the advice we can provide to you.

Step 2: Know and consider your obligations and your options

An estate plan must take into consideration your obligations and commitments. If it does not, it is likely that your estate will be tied up in expensive claims.

The obligations that must be addressed include:

• debts, such as mortgages, credit cards, funeral and burial expenses, and unpaid bills;
• income tax liabilities from both before and after death;
• obligations to spouses, former spouses and children under separation agreements and the Family Law Act;
• obligations to individuals who are financially dependent on the deceased under the Succession Law Reform Act (“dependent support claims”);
• moral obligations, including to spouses, former spouses, children, and other relatives.

Rights of spouses and ex-spouses and dependants

Your married spouse has the right, on your death to elect:

• To receive from your estate in accordance with your will (for instance, if your will gives everything to your spouse), or

• Under the Family Law Act, to receive from your estate as if you had been divorced immediately prior to your death.

In other words, if you give less in your will to your spouse than they would be entitled to in a divorce, then it is likely that they will in effect ‘challenge the will’ and make the election that permits them to receive as if you were divorced the day before your death.

Note: a common law spouse does not have this right in Ontario.

If you owe a duty to support a former spouse, then this duty likely forms a debt due by the estate. If it does, it must be paid before there is any estate available for distribution to beneficiaries (for instance, your new spouse or children). The precise nature of your debts and the consequences for your estate will depend on the terms of any agreement with your former spouse or Court order. For instance, determining the value of an on-going support payment for children can be very complex.

Equalizing gifts/dealing with loans and advances

It is not uncommon for a parent to lend or gift money to one or more of their children. Disputes after the fact among the children are common. Accordingly, a good estate plan addresses these head on up front. The issues include:

1. Properly documenting loans including the principal, the interest if any, and any repayment terms and whether they are to be forgiven on death of the parent;

1. Properly documenting gifts (a gift to a child may be set aside if they cannot prove it was a gift) and whether they are or are not an advance of their inheritance;

1. If appropriate, providing a mechanism in the will to equalize the inheritances of the children having regard to prior gifts or loans (often called a ‘hotchpot’ clause).

More information on gifting now, rather than on death, as a component of implementing the estate plan is discussed below

The scope of the estate plan

All assets, all obligations, from now to death and beyond

A properly constructed estate plan needs to consider:

• Your current and future assets,
• Your current and future obligations,
• Any gifts to be made before your death (known as inter vivos gifts – discussed below)
• Management of your finances during any period of incapacity prior to your death (usually address via powers of attorney: see our eBook Powers of Attorney: A Practical Guide)
• What occurs on your death (your will), and

If there is to be an intentional deferral or delay in distribution of any of your estate after your death