Guide to wills, executors and probate.

Making a will.

Having a will in place ensures that financial affairs are resolved quickly at your death and that your loved ones benefit from your estate and lose as little as possible to taxation.

Vancity's estate planning services can help you to make the right choices for your estate: from understanding the process, to reviewing your plan or making one and directing you to a specialist for additional professional advice. We can also refer you to an experienced estate and trust lawyer to prepare your legal documents for you.

Why do I need a will.

Because it’s the most important piece of estate planning. If you die without an up to date will, the government simply distributes your estate according to provincial law. Not according to your wishes. Only with a will, or a trust, can you ensure that your wishes are clearly laid out.

The best way to create a will is to work with an expert. Many do-it-yourself will packages leave details open to legal interpretation. So, it pays to get good advice.

It also pays to have your will updated regularly by your professional advisor. Your acquisition of assets or life events like a new child, or changes in your relationship status, for example, are good reasons to keep your will current.

How to make a will.

In BC, creating a will can be self-guided or done using the help of a professional and must be written to be legally valid. Here’s a brief overview of what’s included in a will and how to create one:

• Consider what you own
  Think real estate, bank accounts, investments, personal belongings, vehicles, owned both jointly and individually, as well as collectibles, digital assets, etc. It may not be necessary to include these specifics in your will but it may help you account for everything you own. You may simply choose to distribute based on percentage of your overall net estate, after payment of debts, expenses, and taxes, as opposed to item by item, or a mix.
• Decide who gets what
  Beneficiaries are people or organizations who receive your estate. It could be your family members or charitable organization. Clearly list who will receive what portion of your estate.
• Decide who executes your wishes
  After your death, an executor will carry out the instructions in your will. It is important that you choose someone competent that you trust to ensure the process is fair and in the best interest of you and your loved ones.
• Draft the will
  Drafting the will is basically putting the above points in writing – with the help of a lawyer or notary or with do-it-yourself tools.
• Signatures and witnesses
  To make the will legally valid, the written draft of the will must be signed by you (the will-maker) and two other witnesses. The witnesses cannot be your beneficiaries or their spouses.
• Store, review, update as needed
  As long as your executor knows where to find it, you can store a will in any safe place or with your lawyer. You can also update your will in case of major life events like marriage, birth of children or grandchildren, or changes in your assets. Any updates must be properly executed in front of new witnesses through an official amendment.

How to distribute my estate.

Distributing your estate may be more complicated than simply dividing things among your heirs. Here are some of the steps that may help you as part of this process:

• Determining the value of your assets from pensions, investments, real estate and personal property.
• Assessing which assets you own jointly with anyone and who are the beneficiaries of your RRSPs and insurance policies.
• Appointing an executor, the person who will see that your wishes are met.
• Deciding on your goals. Most people want to maximize the value of their assets and protect them from excess taxation.
• Ensuring you leave behind enough liquid assets (cash, stocks or bonds) so that your executor doesn’t have to sell physical or family assets to pay taxes.

When I’m unable to make decisions while I live.

There are two other important documents you should be preparing in addition to the will: an enduring power of attorney and a representation agreement. These legal documents are designed to protect you and your family by assigning the power to look after your financial and legal affairs, to a legal representative should ill health prevent you from making decisions about your affairs on your own.

Choosing an executor.

Role of an executor.

An executor is an individual or a corporation named in your will to settle your estate when you die. The executor takes legal ownership and possession of your assets and is responsible for distributing assets according to your instructions, and for paying your debts and taxes. Your executor has a special duty to act in good faith for the benefit of your beneficiaries and can be held personally liable for any mistakes that cause a loss to your estate. Anyone can be appointed as an executor but it is important you choose someone who has good judgement, strong experience and can handle the responsibility wisely.

In some cases, you may choose to appoint more than one executor, making each party a co-executor. For example, you may wish to lighten the administrative burden by dividing responsibilities between two parties, or you may want your estate to benefit from the wisdom or expertise of more than one person or corporation.

When to hire a corporate executor.

If you have a complex estate, a high net worth or anticipate potential family disputes after your death, you can hire a corporate executor to handle the distribution of your estate in a more professional manner.

Costs of estate admininistration.

Executor fees.

An executor, whether an individual or a corporate entity, is entitled to remuneration for acting in that capacity. You may specify this amount in your will or in a separate compensation agreement, if you’ve appointed a company authorized to act as an executor and trustee.

If none of these are accounted for in your will, the executor will be entitled to the remunerations based on the following three components under the Trustee Act:

1. Capital fee — up to a maximum of 5% of the value of the assets in the estate
2. Revenue fee — 5% of all income collected in the estate
3. Care & management fee — 2/5 of 1% per annum based on the fair market value of the trust. This fee is applicable when there is a long-term trust established in the will, such as a trust for a minor or a mentally challenged beneficiary. Please note that this fee is not charged when the estate is distributed directly to adult beneficiaries.

Probate fees.

Probate is the legal process of verifying a will and confirming the authority of the executor by the court. When an application is made to court for probate of a will (or letters of administration when there is no will), a probate fee is payable to the Minister of Finance. That fee is based on the fair market value of the assets passed on by the estate, including real and tangible personal property of the deceased, situated in British Columbia and intangible personal property anywhere in the world. Probate fees are calculated on the fair market value of assets (both real and personal) as at the date of death.

Probate fees are established by the provincial government and are subject to change. Currently, the probate fee schedule is as follows:

A filing fee of $200 is required for estates which have a gross asset value greater than $25,000.

Some assets can pass outside of the will — such as assets held jointly with right of survivorship and life insurance policies or RRSP/RRIF/TFSA accounts where there is a named beneficiary. Those may not form part of the estate for purposes of calculating the probate fee.

While you may wish to arrange your affairs, so your assets do not pass through your will, please seek professional advice before proceeding with any planning of this nature.

Tax implications.

As part of distributing your estate, you want to ensure that taxes don’t eat into what you’ve left behind for your loved ones. There is no inheritance tax or exemptions in Canada, and any taxes you owe at the time of your death are deducted from your estate before the remaining is passed on to your beneficiaries. However, there are multiple situations that may require your estate to pay taxes on the property/assets before they are distributed to your heirs.

Deemed disposition on death.

In Canada, when someone dies, all capital property owned by that person is deemed as sold at a fair market value of the property as on the date of death. The estate will be required to pay capital gain taxes even if there was no sale and no monetary gain.

Taxes on RRSP and RRIF.

Your funds in RRSP (registered retirement savings plan) and RRIF (registered retirement income fund) accounts, unless transferred directly to a surviving spouse or financially dependent children, are treated as income earned in the year of your death and can incur significant taxes.

Principal residence exemption on capital gains.

If the property inherited was used as a principal residence and is situated on land area of one-half hectare or less, the gain up to the date of death may be exempt from capital gains tax. If the inheritor(s) continue to use the property as a principal residence, future profits may also be exempt from capital gains.

Exemptions on charitable donations.

Donating to charities is a great way to do some good while receiving a tax break. If your will mentions transferring any or all parts of your estate to a registered charity, you become eligible for a tax credit for the fair market value of the asset you’ve chosen to donate.

However, taxes on your estate may not be the most straightforward to navigate, so reviewing your legal plan with a professional can make the most of the exemptions available.

Contact us.

To find out more, speak with an Estate and Trust advisor by phone or online by booking an appointment.