Please read the disclaimer before perusing the following article.
written January 18th, 2002, published in Agridigest
Everyone should have a will which suits his or her current circumstances. This general rule applies particularly to farmers, who have special estate planning issues and special tax rules.
“Well,” you may say, “easy for her to talk! She’s a lawyer and you can bet she isn’t forking out $500 or more, every time she wants a new will! Really, why should I have a will? I’m don’t think I’m going to die right now—I want to keep farming and I don’t know which of my children should have the farm.”
Okay, here are the real reasons to have a will:
No one knows when the moment of death will be. If your affairs are in order, it may ease the pain and difficulty for your survivors. If your affairs are not in order, the problems that you create will have to be sorted out by the very people you love the most, at a time when they are particularly distressed. The result may be that they lead very different lives after your death from the lives that you wanted them to have, and that they could have had, had your affairs been in order.
If you don’t have a will, the government makes your will for you. The Estate Administration Act says how your estate will be distributed. Some assets pass quite apart from the Act, so that property held in joint tenancy will go to the surviving joint tenant, and insurance or RRSPs with a designated beneficiary will go to the named beneficiary. Then the Estate Administration Act applies to the rest of your assets. Assuming you leave a spouse and children, the Act says that the first $65,000 in value goes to your spouse, and the remainder is divided among your spouse and children depending on how many children you have. If you have one child, the spouse and the child split the remainder of the estate. If you have more than one child, the spouse receives a third of the remainder and the children split the other two-thirds. The spouse generally becomes the administrator of the estate. Sometimes consents of unpaid creditors are required to get the court order appointing the spouse as administrator.
So what’s wrong with that arrangement, you ask.
I’ve heard a lot of farmers say that farmers or business people can do a better job of anything than government can. That same viewpoint ought to apply to distributing your estate. You know your spouse and family and are more likely to make appropriate decisions about the division of your estate than the prescribed government division.
If you have underage children, your spouse will need access to all of your estate just to get the kids fed and educated and the dentist’s bills paid. If you do not have a will, then the Public Guardian and Trustee will hold the children’s share of your estate. Your spouse has no automatic access to those funds. However if you make a will, your estate can all be transferred to your spouse who then has the responsibility of looking after the children. Alternatively you can create trust funds for the children under your will. The executor, not the Public Guardian and Trustee, will then make decisions about spending money out of the children’s trust funds.
If you do not have a will, it will likely be impossible to keep the farm going while your teenage children grow up enough to decide if they want to stay, or not. Not having a will makes it much more likely that the farm will have to be sold so that the children’s share can go into trust with the Public Guardian and Trustee.
The Estate Administration Act provisions do not change—but the terms of your will should suit the different stages of your life. When you are 25 years old with a wife, a big mortgage and young children, your will should be quite different from the will that is appropriate when you are 55, no mortgage, a separated spouse, a common law spouse, and four adult children one of whom has been working on the farm for the past ten or fifteen years. Things change—so should your will.
Many families, including farm families, have differences of opinion over the distribution of a parent’s estate. Can the will solve these differences?
The answer is “maybe yes, maybe no”.
Your will cannot stop a spouse, including a common law spouse, or child, from suing for a larger share in your estate under the Wills Variation Act. In fact, a good argument for estate planning, which often includes arrangements to transfer part of your assets during your lifetime, or make sure that they pass outside your will, is that you are then more likely to achieve the overall result you want, without risking a challenge to your will.
The best estate plan, whether implemented through your will or during your lifetime, is one that has been thoroughly discussed or even negotiated with the members of your family, to the point where no one is so displeased with it that litigation is likely on your death. The worst estate plan is one that comes as an unpleasant surprise to your spouse or children.
That TV ad about the will kit looks pretty enticing, considering legal costs of $500 and up to draft a will, and considerably more legal and accounting fees to figure out and implement an estate plan.
I am however reminded of a statement of Master Michael Funduk, who in 1998 said in a case called Alberta Treasury Branch v. Powell, “If Mr. Powell was to himself remove his inflamed appendix he can do so, but he will botch the job. If he wants to drill and fill his aching tooth, he can do so but he will botch the job. If he wants to act for himself in this lawsuit, he can do so but he will botch the job. He has.”.
I like to see clients handling as much of their own legal work as they feel like doing and can handle capably. Wills, however, are technically difficult documents to write. A botched will, like a botched appendix removal or botched lawsuit, is difficult or impossible to fix. The legal costs of trying to fix it or fighting over it, will make the money that you spend having a lawyer do your will (or even having a suite of professionals planning your estate) look like a bargain.
For additional information, readers may want to get a copy of “Estate Planning for the B.C. Farmer”, a publication of the province and federal government available through the Ministry of Agriculture. Chapter 2 is about some considerations in planning your will, and Chapter 7 talks about transferring the farm to your family via your will. The publication will help you prepare to discuss your estate plan with professional advisors.
Please read the disclaimer.