what you need to know about intestacy rules

You know that having a will is important, but understanding the implications of not having a valid will in place before you die may put some urgency behind establishing your will as soon as possible. More than half of adult Canadians do not have a valid will to protect their assets upon their death leaving their estate unprotected and their wishes unfulfilled.[1]

Dying Intestate

When you die intestate you forfeit the right to the following:

Control over who your executor is. Anyone who wishes to have the job must apply through the courts, causing delays and additional unnecessary costs.

Control over where your assets go. The Intestacy Rules will be the guide for how your estate is to be distributed and your wishes do not factor into the distribution of your estate.

Control over your own burial process. If you have specific requests for your burial, such as cremation, you will not get to have your say after the fact due to there being no will to guide the process.

The Succession Law Reform Act

Possibly the most important point from above is control over where your assets go. The Succession Law Reform Act (the “Act”) takes over in order to establish lawful distribution of your estate, regardless of what your intentions may have been. The rules are quite extensive and account for many possible situations, but here is how a basic distribution will look and some problems to be faced under the Act if the deceased has a spouse and two children:

The first $200,000.00 of the estate (also known as the preferential share) goes automatically to the surviving spouse while remaining residue is divided into three equal shares; the spouse receives one share while the children each receive an equal share. The residue is divided equally into shares for each additional child should there be any while still providing one share to the surviving spouse.

Some problems with this formula arise when the deceased has a large estate and has left the family with an expensive lifestyle to carry on. The surviving spouse may not have enough money to continue the lifestyle if a large percentage of the estate is held in trust for children under 18 years of age or distributed to children over 18 years of age. Lawfully each child must receive their share of the residue as per the Act, regardless of the needs of the household.

Another problem arises if the deceased and their spouse were separated but not legally divorced and perhaps the deceased has a new common-law spouse of many years but is still legally married to their former spouse. Suddenly a good portion of the deceased’s estate is being distributed to someone they hadn’t intended while their current partner is left out with no legal ground to stand on.

It’s best to protect your family and your assets by having a legal will in place prior to your death to ensure your estate is divided as per your own wishes. For a more in-depth look into intestacy rules and how they can affect you, please contact your financial advisor specializing in estate planning.

[1] LawPRO survey, 2012.