legacy planning
Wills
A Will is a declaration, signed with proper formalities, regarding a testator's (giver's) wishes for his/her property and/or children upon death. Wills can range from generic to specific to complex. A Will provides the giver with the ability to make decisions about what to do with his/her stuff and kids instead of the government deciding.
Secondary Wills
There are situations where the giver in a Will would prefer that the allocation of property remain private or to avoid certain kinds of Death Taxes. In either of these situations, a secondary Will is designed to by-pass Probate to avoid public scrutiny and certain kinds of Death Taxes.
Will-Substitutes
A Will is a powerful tool in legacy planning. However, it is not the only one - there are various other legacy planning tools, such as: inter vivos gifts, mortis causa gifts, deeds, inter vivos trusts, joint interests, life insurance, pensions, beneficiary designations. Depending upon your specific circumstances, one of more of these Will-substitutes may be appropriate. The following is a brief description of each of the above legacy planning tools.
Inter Vivos Gifts
An inter vivos gift is where the giver (donor) gives the receiver (donee) property while the donor is still alive. This type of Will-substitute is given without conditions. Unless an object cannot be delivered conveniently, actual delivery of the object is normally required. If the property is not an object, it may be capable of being assigned to another person.
Mortis Causa Gifts
A mortis causa gift is a type of inter vivos, explained above, where the giver (donor) gives property, not including real estate, in circumstances where death is reasonably feared by some specific peril. The donor can revoke the gift while still alive and the gift is automatically revoked if the donor recovers.
Deeds
A deed, in the context of legacy planning, is a special kind of inter vivos gift that, as long as the giver (donor) does not retain control of the property, provides a work-around to a Will. The downside to this type of Will-substitute is that the donor cannot change his/her mind after the fact except by some legal principle, such as: reversion, possibility of reverter, a right of entry, or a legal interest under a use. If you are considering a Will-substitute by deed, it is important that you consult a lawyer to make sure that the deed will not be construed as a Will.
Inter Vivos Trusts
An inter vivos trust, in the context of legacy planning, is a Will-like trust that is declared while the giver (donor) is alive. This type of Will-substitute is flexible and powerful, but it fraught with formalities. If you are considering an inter vivos trust in your legacy planning, consult a lawyer familiar with the power of this type of trust and its formalities.
Joint Interests
A joint interest, with a right of survivorship (jus accrescendi), provides that upon the death on one of the joint-owners in the property, the surviving owner takes the property completely without Death Taxes or public scrutiny. This is often an attractive Will substitute for persons in life-long relationships, such as spouses or parents.
Life Insurance
Life insurance is intended to provide your beneficiaries with a cause of action (chose in action) against an insurer should you pass away during the contract period. These types of contracts can be an individual policy or a group policy. Normally, the person whose life is insured against has the right to designate a beneficiary of the contract.
What is also advantageous from a Will-substitute perspective is that life insurance permits you to avoid claims of your creditors. You may designate a beneficiary irrevocably - meaning, unless the beneficiary consents, you cannot change beneficiary designations. This could be useful to provide for a former spouse upon breakdown of the marriage. However, one cannot make an irrevocable designation by Will. If you are considering using this type of Will-substitute, seek legal advice whether Bankruptcy law, Tax law, or Dependants' Relief provisions may undo your attempts.
Pensions
A pension functions as a Will-substitute by designating beneficiaries of what is left after death or some other event. There are various types of pension plans and the specifics of your plan should be consulted before determining beneficiary designations. This area is regulated by the Part III of Ontario's Succession Law Reform Act, with a few exceptions such as Registered Retired Savings Plans (RRSPs) under Part V of the Insurance Act.
Beneficiary Designations
Beneficiary designations potentially form part of any of the above and, strictly speaking, are not a stand-alone legacy planning tool. Notwithstanding this, there are specific issues that may arise regarding the designation of beneficiaries that you may benefit from knowing about. Consider how a standard revocation clause in a Will can revoke the beneficiary designation of some Will-substitutes. In Ashton Estate, the beneficiary designation of a Registered Retirement Income Fund (RRIF) was revoked by virtue of the standard revocation clause in the Will.