Since November is “Make a Will Month” in Ontario, I wanted to write about a question that often comes up in discussions I have not only with clients, but also with friends and family: what happens if I die without a Will and my children are minors?
Distribution of Estate on an Intestacy
In Ontario, if you die without a Will (this is called an “intestacy” or dying “intestate”), the Succession Law Reform Act, sets out who will inherit your estate. If you have a married spouse and children, your spouse will receive a preferential share of your estate (recently increased to the first $350,000 of the estate), in addition to any assets of which your spouse is the designated beneficiary or that pass to your spouse by right of survivorship. Any additional amount over $350,000 is to be shared by the spouse and children (if there is only one child, the spouse and child share the remainder equally, if there are two or more children, the spouse receives one third of the remainder with the children equally sharing the other two thirds). This provision does not apply to common law spouses; in the case of common law spouses, a common law spouse is not entitled to a share of the estate if there is no Will; the children are the sole beneficiaries of the estate. A common law spouse may still receive assets for which they are the designated beneficiary or entitled to by right of survivorship.
Payment of Funds for Minor Children
If you die without a Will and your minor children are entitled to a share of your estate, they cannot simply receive the funds themselves, nor can the appointed guardians manage the money without a court order, unless the amount is less than $35,000. If the amount is greater than $35,000, there are two options: someone can apply to the court to be the child’s guardian of property, which would give them the authority to manage the funds on the child’s behalf or the funds can be paid into court to be managed by the Accountant of the Superior Court of Justice. In either case the child will be entitled to receive any balance remaining when the child turns eighteen (18) years old.
Benefits of Making a Will
There are several benefits of making a Will, whether or not you have children, but when you have minor children here are some key reasons that you should have a Will in place:
- The ability to protect a child’s inheritance beyond the age of eighteen (18): By having a Will, you can create a Trust for minor children within the Will. In addition to the Trustee having the authority to use the funds for the children’s benefit, you can also set the age at which the child would receive the balance remaining;
- Control over who manages the Trust: When you create a Trust for minor children in your Will, you get to appoint someone to manage the Trust. You can appoint more than one person or have a back up if your first choice cannot do it. If you die without a Will, you are leaving it up to those who you leave behind to decide who should apply to manage the funds. This may lead to dispute between family members and the person who is eventually appointed may not be the person you would have chosen yourself. While it might be a friend or family member, it could also end up being the Accountant of the Superior Court of Justice.
- Control over payments from the Trust: in your Will, you will grant the Trustee the authority to pay from the trust any expenses for the health, education and well-being of the child. You may even choose to leave instructions for the Trustee about the type of lifestyle you would want the child to have and what values are important to you in terms of managing the funds. If you do not have a Will, a guardian of property will have to manage the funds in accordance with a plan submitted to the court or the guardian will need to seek approval from the court and the Minor Funds Program to have funds paid out.
In addition to ensuring you have a Will in place, you should exercise caution in naming children as designated beneficiaries of life insurance policies or registered plans. If you do so, even if you have a Will, the funds will bypass the estate and those designated funds will be dealt with in the same manner as described above. You should obtain legal advice before designating your minor children as the beneficiary of a plan or policy.