Creating a Legally Valid Will in Canada

The accompanying illustration created by Melanie Lambrick visually represents the topic being discussed.

Should you possess anything of worth – be it savings, investments, a vehicle, a place of residence, heirlooms, or other assets – or even if you have a child or a pet, it is imperative that you establish a will. But why is this necessary? In the event of your demise without a will, the court will determine the distribution of your possessions and property based on the estate laws within your province. Additionally, you will have no say in deciding who will take care of your dependents, including your beloved furry companions.

There are various methods through which you may create a legally-binding will. You have the option of hiring an estate lawyer, utilizing an online or printed will kit, or even drafting one by hand, provided it aligns with the rules governing your specific jurisdiction. Each approach has advantages and disadvantages, and it is crucial to be aware of and mindful of certain key considerations.

What constitutes a will?

A final will and testament is an authorized document that designates the individuals, referred to as beneficiaries, who shall inherit your assets upon your demise. In addition, it precisely outlines the distribution of your belongings among the beneficiaries. In the event of minor children, a will also designates the guardian(s) responsible for their care in the unfortunate circumstance of both parents passing away simultaneously. Moreover, it is necessary to appoint an executor within the will, who will oversee the implementation of your estate's terms and conditions.

When should I create a will?

An adult is able to create a will at any age; however, most individuals tend to postpone this task due to their reluctance to contemplate mortality. According to the 2019 Canadian Financial Capability Survey, a mere 22 percent of individuals under the age of 35 in Canada possess a will. Furthermore, even though 95 percent of Canadians aged 65 and above have a will, more than half of them (53 percent) have not updated it in five years, which implies that their will may not align with their current wishes. It is essential to revise your will whenever a significant milestone occurs in your life, such as marriage, divorce, the birth or adoption of a child or grandchild, or the acquisition of real estate, such as a home.

What is the role of an executor?

An executor, also known as an estate representative, estate trustee, or liquidator, is responsible for fulfilling the instructions delineated within your will in order to conclude the affairs of your estate. This primarily administrative role entails interacting with financial institutions, insurance companies, government and tax agencies, as well as corresponding with the beneficiaries and family members of the deceased.

Undertaking the task of choosing an executor can be a complex and time-consuming endeavor. Stephen Hsai, a lawyer specializing in estate planning with Miller Thomson LLP in Vancouver, suggests following the "three T" rule when making this decision. According to Hsai, the perfect executor should possess your trust, have the necessary time to fulfill the obligations, and be located within the appropriate jurisdiction.

One potential issue that arises when appointing a non-resident executor is the potential classification of the estate as non-resident by the tax authorities. This classification could lead to adverse tax consequences, such as the loss of preferential tax treatments for capital gains and dividends. To learn more about why updating your executor in your will is important as you age, click here.

If you do not have a suitable and willing family member or friend to act as your executor, or if you would prefer to spare them the burden of what personal finance columnist Rob Carrick describes as potentially the "worst job ever," hiring a corporate executor or trust company may be a favorable alternative. This is particularly true if you have a large or complicated estate.

All executors, regardless of their professional status, are entitled to compensation for their services. The will itself may not specify the exact amount of compensation, so beneficiaries should keep this in mind. The fees charged by executors can vary, and in some cases, they may choose not to take a fee at all. Each province sets a cap on allowable fees, with British Columbia and Ontario effectively limiting it to 5% of the estate's value. Therefore, the cost to the estate may end up being the same regardless of whether a professional or amateur executor is appointed.

In addition to a last will and testament, it is important to have a living will. While a last will and testament outlines your wishes for after your death, a living will addresses situations in which you may become incapacitated due to illness or an accident. This legal document specifies the types of life-prolonging healthcare treatments or palliative care you desire, designates guardians for your children, and grants power of attorney to representatives who can make financial and health decisions on your behalf.

It is important to note that living wills and powers of attorney are only effective during a person's lifetime and terminate upon their death. A last will and testament, on the other hand, only becomes effective after a person's death.

When creating a will, the primary focus should be on identifying the "who" and "how" of your estate, rather than meticulously listing all of your assets. Your will should include the names of your chosen executor, guardians for minor children, beneficiaries, and instructions on how you want your estate divided among your heirs. It is unnecessary to itemize or mention specific assets in your will, as most of your assets will automatically become part of your estate upon your death. Any remaining assets, after debts and taxes have been settled, will be distributed among your beneficiaries. However, you may choose to create a separate document listing your assets, liabilities, account numbers, passwords, and any other relevant information to assist your executor and family in handling your affairs after your passing. It is important to note that this separate document would be part of a comprehensive estate plan and not included within the legal will. To learn more about the importance of having a will and ensuring it can be found after your passing, click here.

Strategies to Reduce Tax Impacts Upon Death

Certain assets, like a home that spouses own through joint tenancy, bypass the estate and are directly transferred to the other owner. Likewise, registered accounts with named beneficiaries do not go through the estate, as explained in this comprehensive guide to naming a beneficiary of your TFSA, RRSP, or RRIF by Rob Carrick.

These distinctions are crucial, as only assets within the estate are subject to probate fees, which vary by province. To minimize probate fees or income taxes on your estate at death, it is advisable to consult a lawyer or financial planner to develop an estate plan that considers factors such as joint tenancy and named beneficiaries on registered accounts.

What Sets a Will Apart from an Estate Plan?

A will serves as an essential component of an estate plan, but it is only one element. An estate plan may also include powers of attorney, living wills, trusts, life insurance, instructions for final arrangements, a statement of assets and liabilities (including digital assets and crypto keys), and advanced tax planning strategies to minimize taxes upon death.

There are numerous complexities in estate planning, particularly when assets are held outside of Canada. Cross-border tax systems can create challenges and conflicts, as noted by Tim Cestnick, an accountant, financial planner, and regular Globe and Mail contributor. Canada does not have estate taxes, but income taxes are imposed upon death. If certain assets appreciate in value, income taxes may be incurred on capital gains. However, double taxation or even triple taxation can arise if other countries also impose estate taxes on the same assets.

In these situations, seeking advice from a tax lawyer, accountant, or trust and estate practitioner is recommended to explore estate planning options and minimize tax liabilities.

Can You Draft Your Own Will in Canada?

Surprisingly, in all Canadian provinces and territories except British Columbia and Prince Edward Island, it is possible to handwrite a legally valid will. A handwritten will, also known as a holographic will, must be written on paper (napkins are not acceptable), in the testator's own handwriting, using pen (not a computer or typewriter), and must include the original signature. These simple requirements are sufficient for the will to be legally valid.

Legality of Online Will Kits in Canada

While a handwritten will is legally binding in most provinces, individuals who prefer guidance in terms of content and wording may opt for pre-printed or online will kits. These kits simplify the legal language, allowing the testator to add their personal details. Will kits are considered legal throughout Canada as long as they meet the following criteria:

• The will is in paper format and contains your original signature. Digital documents/signatures are not acceptable, so if you use an online will service, you must print out the final will and personally sign it. (However, in B.C., digital signatures are permitted, using platforms like DocuSign, and the will can be in digital format.)
• Two impartial witnesses observed you sign the will and also signed the document themselves. These witnesses must not be family members or individuals named in your will.
• You were of legal age (according to your province's age of majority) and mentally competent when you drafted the will.

Is it necessary to hire a lawyer for making a will in Canada?

No, a lawyer's assistance is not required for creating a will. You can do it independently, as mentioned above. However, a more pertinent question is whether you should consider hiring a lawyer.

If you have a complex estate (e.g., being a business owner or owning several properties) or if your family situation is intricate (such as a blended family from previous marriages/divorces or a beneficiary with a mental disability), it is advisable to seek the services of an estate lawyer. These types of situations are not easily handled by will kits, which are primarily designed for simple and uncomplicated estates.

What is the cost of creating a will?

The cost depends on the approach you choose.

• If you decide to hire a lawyer, you will receive professional advice, but the cost will be a minimum of 0 and potentially several thousand dollars for complex estates.
• Online will kits are becoming increasingly popular for those seeking a basic will for a straightforward estate. After determining your executor, beneficiaries, and guardians for minor children (if applicable), the online service will guide you through a user-friendly step-by-step process. The whole procedure takes about 20 minutes. However, to make the will legally binding (except in B.C.), you must print out the document, sign it in the presence of two impartial witnesses, and have the witnesses also sign it.

Multiple providers in Canada now offer these services, with costs ranging from approximately $40 to $139 for a basic will. Some packages also include powers of attorney. Certain services allow you to make changes to the will at any time without additional cost, although you would need to print and sign (with the witnesses) the revised version.

• Using a pre-printed will kit is another option. These kits are similar to online will kits but come in a pre-printed fill-in-the-blank format, making updates impossible. The document still needs to be signed by you and witnessed by two individuals for legal validity. The cost is under $40.
• Writing the will by hand is the simplest and free option, excluding the cost of pen and paper.

It is important to note that with any of these choices, you are responsible for securely storing the original signed copy of your will and informing your executor of its location after your passing. Additionally, you can register the will and its location on CanadaWillRegistry.org, which aids executors in locating the original will in case they have forgotten or were not explicitly notified. Some online services and lawyers cover the $40 registration fee.

Four methods for creating a will in Canada

What happens if someone in Canada dies without a will?

Some individuals believe that if they die without a will, known as dying intestate, their estate will automatically pass to their spouse, children, or closest relatives. However, the truth is that the distribution of your estate depends on the legislation in your province. In other words, the courts will determine who receives what and in what proportions.

The regulations differ significantly across jurisdictions, adding complexity to the matter. For instance, in certain provinces, if the deceased does not have a will, a common-law partner may inherit a substantial portion or the entire estate. However, in other provinces, such as Ontario, a common-law partner is not entitled to receive anything.

This judicial decision-making process takes time and money, which diminishes the value of the estate and prolongs the period before your loved ones can access the assets. Additionally, the court will appoint guardian(s) for any minor children, potentially deviating from your own choice.

What distinguishes a will from life insurance?

While a will and a life insurance policy are essential components of an estate plan, they serve different purposes.

A life insurance policy provides beneficiaries with a tax-free lump sum of benefits upon your demise. Generally, life insurance is used to safeguard your dependants, such as a spouse or minor children, from financial hardships in the event of your death during your working years. This assists them in covering daily expenses, mortgage payments, and saving for their future needs, such as retirement or their children's education. Additionally, life insurance can cover funeral expenses, which can be costly.

Since the death benefit from life insurance is exempt from taxes, some individuals use it as a tax-efficient strategy to transfer wealth to the next generation. Moreover, because the life insurance death benefit is directly allocated to the policy's beneficiaries, it avoids being included in the deceased's estate and thereby avoids probate fees. However, it is important to consider the increased cost of life insurance as you age and assess it against potential tax savings.

If you don't have dependants but are concerned about burdening your family or others with the financial responsibility of your funeral expenses, making and prepaying those arrangements is likely a more cost-effective option than opting for life insurance.

Where can you find online will services?

Here are some popular online will services available in Canada:

Willful

• Offers wills, powers of attorney, and living wills
• Clients can compile a list of assets and specify funeral or burial wishes
• Serves individuals with non-complex estates in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, and Saskatchewan

Cost: for an individual will; $189 for a will, power of attorney, and living will (or $329 per couple). All updates are free.

Epilogue Wills

• Provides basic wills and powers of attorney
• Serves clients in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick, Nova Scotia, and Prince Edward Island

Cost: $139 for an individual will ($229 per couple); $179 for a will and power of attorney ($289 per couple).

FormalWill.ca

• Offers wills, powers of attorney, and living wills
• Includes separate pet wills to arrange care for your pets
• Serves clients across Canada

Cost: $59 for an individual will; $39 each for power of attorney and living will; $59 for a pet will. For an additional fee ($149 to $249), you can have a lawyer review your will, power of attorney, or living will. You can also subscribe to a bonus option (at the time of purchase) that allows you to make future updates to your will.

LegalWills.ca

• Provides wills, powers of attorney, and living wills
• Offers a "life locker" option to store personal information, such as a list of belongings, digital assets, and important contacts, for your family and executor