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Wills, Thrills and Chills – Changes to Wills and Estates Law in British Columbia

I am the first to admit that lawyers generally a pretty conservative bunch; if something has worked well enough in the past (no matter how ancient), then why rock the boat by trying something new? Sometimes, however, even the most cautious and traditional of lawyers realize that it’s time for a change. Accordingly, after many, many years of consideration, contemplation and conversation, our province has implemented sweeping changes to the rules regarding wills and estates through a single new piece of legislation entitled the Wills, Estates and Succession Act that consolidates many other statutes into one stop shopping. Essentially, it’s like making 90 years of changes all at once.
The first point I’d like to make clear is that, despite these “sweeping changes,” your old Will may still be just fine. Accordingly, while is possible that you might want to make a few tweaks if you’ve won the lottery, found / lost a spouse or your backup executor is starting to repeat himself, your current Will might still do the trick if life has continued chugging along its expected course. The new rules are designed to correct some rather large injustices, make things a little easier understand and to cut through some of the red tape.
Secondly, as part of the same package of changes, they’ve changed who gets what if you die without a Will, particularly if you have a spouse and kids. Although I still believe that most of us need a Will, at least a surviving spouse will be a lot better off than in the past if their spouse didn’t get around to writing one. Before taking too much comfort in this outcome, however, I strongly suspect that most surviving spouses still wouldn’t be too pleased with their share of the estate under the new distribution formula. Read on if you want to know more.
Finally, before I dive in and talk about some of these changes, I want to remind those of you smugly sitting back with an up-to-date Will that their estate plans may still need some work. In particular, what about your assets with beneficiary designations, like registered plans, pensions, segregated funds and life insurance? Will you incur unnecessary probate fees at death? Are there ways of reducing taxes for you, your estate and your heirs? Might someone challenge your Will and are there ways to stop this without changing who gets what? If you are wondering about the answers to any of these questions, it still may be time to bite the bullet and get some more professional advice.
Changes to Wills and Estates Law
With no further waffling, introductions or words or warning, here are some of the biggest changes:

  • Your Will is no longer automatically revoked when you remarry. Until now, unless your Will specifically said that it was drafted “in contemplation of marriage” to your special someone (and you ended up marrying him or her rather than one of the bridesmaids or bridegrooms,) your Will was automatically revoked when you said, “I do.” While this is likely a good news story for kids after you take the plunge for the 2nd, 3rd or 8th time, but don’t revise your Will, it raises huge problems for your new spouse. Although any gifts to your ex-spouse will still be invalid (unless the Will says otherwise), the contingent beneficiaries of your old Will would still inherit. This could mean that it all flows to the children of an earlier relationship, your siblings, parents or even your ex’s family. Although your new spouse can still challenge your Will under essentially the same provisions that applied under the old rules, s/he may not get as much as you’d like and there might be an ugly and expensive battle along the way.

As a final warning, even if the right people end up getting the right amounts under either your new or old Will, don’t forget about updating your beneficiary designations! Unlike your Will, assets with beneficiary designations that name your former spouse as the beneficiary will still end up in his or her hot little hands at your death if you don’t make the necessary changes.

  • The rules about who is presumed to have died in a common disaster have changed. Previously, the younger person was presumed to have survived the older. On the other hand, for life insurance, it was presumed that, when the order of death was unknown, that the beneficiary died before the person insured so that the money would end up going to contingent beneficiaries or, if none, the owner’s estate. Having different survivorship rules for different types of assets created a lot of confusion. Moreover, if the two deceased’s Wills provided for different people to inherit if the other wasn’t around to inherit, the order of death could determine which people became millionaires and which ones needed to continue clipping coupons. For example, consider a blended family where each spouse had kids from a previous relationship and each spouse wanted 100% of their estate to go their own children. Theoretically, the youngest spouse’s kids could end up inheriting all of the couple’s combined assets, other than those with beneficiary designations, while the older spouse’s could only grumble and moan.

Now, if the order is unclear or both owners die within 5 days of each other, neither will be presumed to have survived the other, so that each deceased’s secondary beneficiaries will inherit. On the other hand, the rules for life insurance haven’t changed, but these rules already avoided this sort of outcome and no change was needed. Finally, if the two deceased own an asset such as land or a bank account jointly, ownership is severed so that each owner owns a separate share. In other words, each owner gets to decide what happens to his share of the property rather than having it all pass to the younger, which can mean a more even distribution of their combined assets than if all the assets passed to the more spritely dearly departed. Using our previous example, the older spouse’s kids wouldn’t need to clip quite so many coupons going forward, even though the younger’s children might no longer be able to afford that Lamborghini.

Although this change is generally for the better, it does cause some potential problems of its own. It can ultimately mean having to probate an extra estate and, if your Will isn’t drafted carefully, people who get specific cash gifts on the death of the last spouse might end up double dipping: since neither spouse survives the other, identical gifts that are effective on the last death might be inadvertently doled out twice.

Fortunately, most good Wills have already solved all the above problems (except for jointly owned assets) by including language that requires heirs to survive the deceased by a set amount of time in order to inherit (most commonly 30 days so that distribution of the estate isn’t delayed too much but long enough so that someone injured in the same event as the deceased will likely pass on if this is going to happen.) The new 5 day period is merely a minimum and is intended to protect those people who inexplicably want to draft their own Wills. For those of you with existing Wills with a longer survivorship period or those of you who want to include one in a new Will, you’re free to do as you like.

  • Changes to what happens if both of your kids die at the same time. Under the new rules, if an entire group or ‘class’ of beneficiaries, such as your children, die at the same time, the gift will be divided equally among them all and essentially paid to their estates, unless your Will says otherwise. Accordingly, if you want grandkids rather than a child’s wife to inherit if your child isn’t around to spend his inheritance, then it remains important to say so in your Will so that this child’s share isn’t distributed according to her own Will or the rules that apply if he died without one.
  • Registered assets can be left to a trustee. Up until now, only life insurance policies and other life insurance products like segregated funds and accumulation annuities could name a trustee directly as the beneficiary. While there were cool lawyerly tricks like “secret trusts” that could accomplish this goal, this could be a costly and complicated process. As a result, if you wanted to leave this money in a trust until your kids were (hopefully) more responsible, it was usually necessary to leave it to your estate, which meant probate fees, delays, creditor issues and potential Will challenges. Now, it is far easier to leave the money to someone else to manage until your kids see the light, without having to pay probate or trigger the other problems I just mentioned.
  • Posthumous birth rules codified. In this era of frozen reproductive material, it is theoretically possible for someone to have children many years after they themselves have departed this brave new world. The rules now require a surviving spouse to advise the court of the intention to use the material within 180 days of the donor’s death and for the birth to take place within 2 years of the deceased’s passing.
  • Changes to the rules surrounding “undue influence.” Sadly, the elderly are particularly vulnerable to manipulation, isolation and intense pressure when writing their Wills. In the past, if someone alleged that the live-in caretaker who has been on the job for 6 months used undue influence when her client named her as the sole beneficiary of his Will, the person complaining had to prove this. Now, the tables have turned. It is now the obligation of someone receiving a gift to prove that there was no undue influence if anyone else raises red flag.
  •  Relaxation of Will Requirements. Until now, in B.C., it was necessary for a Will to be witnessed by two witnesses not collecting any of the bequeathed loot. In addition to provisions that potentially save gifts to witnesses if they are also beneficiaries and other provisions to correct Will mistakes, it is also possible to argue that a document or electronic communication that isn’t executed in the proper fashion is a valid Will. Most lawyers believe that the last rule will create far more problems than they fix. For example, what about that draft copy of a Will the deceased never got around to signing that was sitting on his desk for a month? Although maybe he was just a procrastinator’s procrastinator, perhaps he had a change of heart or had found a few mistakes about who got what that he needed to change? What if that email idea to leave everything to an animal shelter was just a joke or just a fleeting idea? What if the typed and signed note was written under duress or perhaps even forged? For these reasons and more, most lawyer either get the shakes or start speaking with clenched teeth when discussing this change.
  • The division of assets if someone dies without a Will has been modernized. In the past, some bereft spouses were shocked to learn that their inheritance from a dead spouse who hadn’t gotten around to writing a Will was probably less than if they’d gotten divorced instead! If the deceased had more than one child, the spouse would have merely received the first $65,000 from the estate, the right to live in the family home for life and 1/3rd of whatever else was left! Today, surviving spouse inherits the first $300,000 if the deceased had no kids from a previous relationship and $150,000 if the deceased had a blended family. There is no automatic right to reside in the family home, although the survivor is given the opportunity to buy that interest. If s/he can’t afford to buy the home outright, the court can allow the spouse to continue living there and pay interest to the other heirs. Of course, the survivor would also inherit anything they owned jointly or left to him / her through a beneficiary designation (like life insurance or RRSPs.) All the same, this solution is still probably far from ideal for most families. Not only may the deceased have wished a different distribution of assets; she probably would not have been too thrilled with the idea of the Public Trustee managing her kids’ money until they turn 19, at which the heirs gets to spend what’s left anyway they like.
  • The new Act specifically allows a judge to order your estate to pay maintenance to a spouse or child. Although there were previously previous under the Wills Variation Act that allowed spouses, the current provisions provide clarity and lays out a framework for how someone applies for support and options regarding how it is to be paid.
  • Potential changes to how an estate will be divided if heirs challenge your Will. True, the new Act doesn’t specifically make any changes to this area. On the other hand, the wholesale changes to family law in our great province in 2013 might have a huge impact on how your bank accounts, power boats and coin collections are divided among squabbling spouses and children. Essentially, the rules regarding a fair division of your estate upon death (assuming that your heirs haven’t been complete idiots or scoundrels) suggest that a widowed spouse shouldn’t get any less than a divorcing spouse. The new family law rules treat common-law and married spouses equally when dividing property at divorce, which is a nice win for common-law partners. On the other hand, only the growth of assets brought into the relationship or marriage are to be divided (on a 50 / 50 basis). Before, all assets were examined to determine whether they were used for family purposes and, if so, the general presumption was that they should be divided 50 /50, unless someone could show that was unfair. The result: have-not spouses who married into money may not be able to claim as much under the new regime. As the changes to family law are also very recent, we’ll have a better idea of how things work in a few years after some cases have wound their way through the courts and the judges get a chance to do their thing.

For those wondering who can challenge a valid Will, the answer remains your spouse and children. Unlike other provinces, however, even adult kids of significant financial means get a kick at the can if they don’t think they are getting a fair shake under their parents’ Will. Although I don’t have the time to go into specifics today, I do want all of you, especially those with blended families to know that, if you have a spouse or kids, your Will can be contested. Accordingly, especially if you’re planning on treating your kids unequally or leaving your assets exclusively to your new spouse if you die first, I recommend talking with a lawyer to assess whether a challenge is likely and to see what steps you can take to nip this issue in the bud.

Conclusion
As is so common with my blogs, my intention of a brief commentary has somehow morphed itself into a small novel. For those of you have stuck it out to the bitter end, I want to pass along both my thanks and few final words. Most lawyers believe that the new law is a change for the better (except, perhaps, some of the relaxed Will requirements). In most cases, however, a well-drafted Will and perhaps some additional estate planning would have solved most of the problems the new legislation is designed to address. Unfortunately, if you don’t have a Will, it wasn’t prepared with proper legal advice or if it no longer reflects your wishes or situation, there are probably going to be a mix of problems, delays, unnecessary costs and perhaps even unintended results on your death. If you haven’t reviewed your Will and estate plan in a while, do your heirs a favour and spend some time with your team of professionals. Although it is probably on par with a double root canal, at least it shouldn’t kill you.

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One Comment Post a comment
  1. David Rowan #

    Excellent article and so beautifully written, as usual, Colin. Thank you.

    August 28, 2014

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