Wills and estate laws: how does one prepare for death?

Talking about estate planning or preparing a will for your family may be uncomfortable for most people, but time and real-life cases have taught us about its importance. To help individuals, families, and businesses plan the future of their wealth and assets, Canada’s wills and estate laws can serve as a guide.

What is inheritance law in Canada?

Inheritance laws, also called wills and estate laws in Canada, are the set of laws which govern the distribution of a person’s wealth when they die. It provides for:

• minimum standards that wills should follow to be valid
• court process to be undertaken when the will’s validity is being questioned
• minimum requisites in appointing a valid executor of the deceased’s will, an administrator if there’s no will, or a valid guardian for the deceased’s minor children
• execution of a power of attorney
• the default line of succession when a person dies intestate (dying without a will)

While wills and estate laws in Canada are governed by common law, each province and territory in Canada has also enacted its own laws on estate, wills, and succession. Here are some of them:

• Ontario: Estates Act; Succession Law Reform Act
• British Columbia: Wills, Estates and Succession Act
• Alberta: Wills and Succession Act
• Manitoba: Intestate Succession Act; Wills Act
• Saskatchewan: Intestate Succession Act, 2019; Administration of Estates Act; Wills Act

Since Québec is not a common law province, its laws on estate, wills, and succession are generally governed by its Civil Code.

When a person dies, the situation is whether the deceased person has a will or not.

Wills and estate laws govern these two instances, which will guide their families on what to do with the deceased’s estate. In both cases, a probate may need to take place for various reasons.

Executors must also be aware of the period for settling an estate as provided under the different wills and estate laws in Canada.

Learn the five basics to know about inheritance taxes in this article.

Deceased with a Will

In common law provinces, when a person dies with a will, what is stated in the will must be followed by the family. This may cover aspects like the distribution of wealth and the succession of properties, among others. It will be distributed after the deceased’s assets have been liquidated, the debts paid (also using their estate), and funeral and burial expenses settled.

A will is valid if it follows these minimum requirements:

• Written: must be physically written (wills cannot be verbal)
• Age: must be written by a person of legal age
• Sound mind: must be written when the person is of clear mind and can make good judgment
• Signature: must be signed by the testator (the person making it)

Depending on the provincial law governing wills and estate, the will might have to be signed in the presence of a witness or several witnesses. These witnesses must also be of legal age and must not be a named beneficiary.

Holographic wills, which are done privately, will also be valid if they follow the minimum requirements mentioned above.

While a lawyer is not required in drafting a will, it’s important to consult or hire one since there would be certain changes to provincial legislation on wills and estates.

For instance, in Ontario, important amendments were recently introduced to its Succession Law Reform Act. Suzana Popovic-Montag, Managing Partner at Hull & Hull LLP, explains: “Wills are no longer automatically revoked by marriage and for years and years, we've just known that, if you get married, your will is going to be revoked.” This is a welcome change, since “a lot of predatory marriage issues arise as a result of that,” according to Popovic-Montag.

This now means that whenever a person re-marries and wants to change their will which existed prior to the new marriage, they must expressly do so.  Automatic revocation of the earlier will has now been repealed under Ontario’s Succession Law Reform Act.

An amendment to how wills are being witnessed in Ontario was also introduced. “We also have remote will witnessing options which are now permanent. They were initially just temporary measures during COVID-19 pandemic, and so it's wonderful to have that kind of flexibility,” Popovic-Montag said. Other provinces like British Columbia and Alberta also now accept electronic witnessing of wills.

How do I prepare a will in Canada?

“The reality is that everyone has something worth considering,” says Popovic-Montag when underscoring the importance of wills and estate planning for all persons in Canada. Thus, in preparing or creating a will, a person will have to consider the following:

• determining the assets that will be distributed
• appointing the executor who is willing and able to distribute the assets after someone’s death
• identifying the beneficiaries and their appropriate share of the assets
• identifying the required witnesses, according to the wills and estate laws in Canada

Watch this video to learn more about the other considerations in preparing a will:

Here are more reasons why you need an estate lawyer to help you with drafting your will.

Who is entitled to a copy of a will in Canada?

Under the wills and estate laws in Canada, no person – not even those who are “supposed-to-be beneficiaries” – are entitled to a copy of the deceased’s will except for its named executor or the lawyer who holds the will of the deceased.

It is the duty of executors to:

• inform the named beneficiaries regarding the will’s existence
• share the details in the will with these beneficiaries
• go over the process in distributing the estate according to the will

When a person is a named beneficiary in a will, they can request a copy of the will from the executor.

What are the rights of a beneficiary in a will?

While named beneficiaries may compel the executor to enforce what is written in the will, the wills and estate laws in Canada do not provide any “automatic right” for any beneficiary.

What beneficiaries can do is to participate in the probate proceedings when required. They can also allow the legal process of distributing the inheritance to take place. All this, of course, according to the deceased’s will or according to the provincial wills and estate laws.

Deceased without a Will

When a person dies without a will (or dies intestate), the provincial wills and estate laws will govern by default for the distribution of the deceased’s estate.

For example, under Ontario’s Estates Act and Succession Law Reform Act, the distribution of the deceased’s estate will be as follows:

• surviving spouse, but no children: the deceased’s surviving spouse will be entitled to the entire estate left by the deceased; or
• surviving spouse and surviving children: the deceased’s surviving spouse will be entitled to a preferential share of the estate’s value; then, both the spouse and the children will have an interest in the balance of the remaining value of the estate

Common-law spouses are not entitled to any inheritance under Ontario’s Succession Law Reform Act.

Probate proceedings

While the process of a probate proceeding is generally similar among the wills and estate laws in Canada, a probate proceeding will depend on these circumstances:

• the deceased prepared a will before they died;
• the deceased prepared a will but it’s being questioned by their family or by others; or
• the deceased did not prepare a will at all

In all these circumstances, the distribution of wealth will depend on what the wills and estate laws in Canada say.

In general, all three circumstances will undergo probate proceedings, with some variations.

In the first and second circumstances, the probate proceedings will follow their usual procedure as discussed below. In the 3rd circumstance, the court will appoint an administrator to distribute the deceased's estate according to the provincial wills and estate laws.

In a probate proceeding, the named executor in the will, or the next-of-kin when there’s no will, must apply before the court for a Grant of Probate. They will also have to present the will (if there is one) and an inventory of the deceased person’s estate to the court.

During this proceeding, the court shall determine the validity of the will and the capacity of the executor to perform their duties. The court will also resolve any other issues regarding the will.

Once all issues are addressed, the court will hand down the Grant of Letters Probate to the executor for them to perform what is stated in the will.

If there is no will, the Grant of Letters Probate goes to the administrator to distribute the estate according to the wills and estate laws in Canada.

Period for Settling an Estate

For taxation and other legal purposes, the estate of a deceased person must be settled after the issuance of the Grant of Letters Probate and within the period stated in provincial wills and estate laws:

• Ontario: 6 months to 1 year
• British Columbia: 1 year
• Québec: no limit
• Manitoba: 1 year to 2 years
• Alberta: 1 year

In general, to prevent any complications, executors are usually given 1 year to settle the estate of the deceased after the grant of probate.

Is inheritance taxable in Canada?

Wills and estate laws in Canada do not provide for any inheritance tax. This means that any inheritance that a person receives is already tax-free, due to the “deemed disposition” rule of the Canada Revenue Agency (CRA).

“Deemed disposition” rule

Under the rules of the CRA, when a person dies, their assets are “deemed sold” at fair market value, and the capital gains tax will be computed based on the difference of the income and costs of the said sale.

This means that taxes on a deceased’s assets are already paid before they are distributed, either according to the will or the provincial wills and estate laws.

An exception of the “deemed disposition” rule is the estate inherited by the surviving spouse. These properties will be transferred to them at the estate’s value at the time of their spouse’s death.

Executors of wills or administrators of the estate will also have to file the necessary paperwork before the CRA so that the estate or inheritance to be distributed is free from taxes.

“Deemed withdrawal” rule

On the other hand, the “deemed withdrawal” rule applies to the deceased’s registered investments, such as Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). The rules state that at the time of the person’s death, their RRSP or RRIF will be “deemed withdrawn” and its amounts will become taxable.

There are ways to prevent these from being taxed such as when these are transferred to another person’s name, whenever applicable.

How much does a lawyer cost to do a will in Canada?

A lawyer’s fees will depend on several factors, such as:

• the province or territory where the testator is located
• the value of the testator’s estate
• the number of hours spent by the lawyer for the testator’s will

While these costs may discourage a person from engaging the services of a lawyer or not to prepare a will at all, people must still consider doing so. “The cost of litigation is going to be a lot higher than doing the planning in the first place,” says Fiona Hunter of Horne Coupar LLP.

“[Unless] there is significant wealth and if there's minor children or any complications with blended families, there's a huge risk for clients to not do any planning,” Hunter says. “Sometimes, people just don't realize what kind of mess and the cost of that mess will be created by not doing the planning.”