By Lydia Roseman
Without a valid Will, after you pass, your
estate will be considered “intestate”. This means that no one is entitled to
manage or deal with your assets without permission of the Court, and legislation
will determine who will inherit your belongings.
This is not ideal for a number of
reasons, as will be set out in detail below. Importantly, intestacy can create
significant costs and challenges for family members who would normally expect
to benefit under a Will, and will mean you have no control over the final
disposition of your assets.
Below we set out the circumstances that
will lead to intestacy and exactly what will occur following death if there is
no valid Will.
When does intestacy occur?
An individual is considered to have died
“intestate” if there is no valid Will at the time of their death. The word “valid”
is important here.
Sometimes an individual will leave behind
a Will thinking that it complies with the legal requirements and will be
binding on the their estate. However, without proper legal assistance, it can
be quite easy to accidentally create an invalid Will.
To create a valid Will in Alberta, you
must comply with the requirements set out in the Wills and Succession Act. There are three
types of valid Will under Alberta legislation:
- a formal Will;
- a holograph Will; and
- a military Will.
To be a formal Will, the will must be
made in writing and must be signed by the testator and two witnesses, all in
the presence of each other. Generally if a lawyer is involved in the preparation and signing of
your Will, you will have a formal Will.
A holograph Will on the other hand, must
be made entirely in the testator’s own handwriting (it cannot be typed) and
signed by the testator. No witnesses or any other formality is necessary.
Finally, a military Will can be made by a
member of the Canadian Forces on active service by signing it, without
witnesses or other formalities.
An example then of what would not constitute
a valid Will would be a typed Will signed by the testator without a witness or
with only one witness.
While a court may in limited
circumstances validate a non-compliant Will, the applicant would need to
provide “clear and convincing evidence” that the document was intended to be a Will
and sets out the testamentary intentions of the testator. This would likely involve a lengthy and costly court procedure,
especially if others take an alternate view and argue against the Will’s
validity.
Who can administer your estate?
Generally, a valid Will appoints an
executor who is entitled to deal with your estate. Where an individual dies
intestate, there is no executor. Instead, someone will need to be appointed as
the “administrator”.
Before any of your assets can be dealt
with or distributed, someone will need to apply to the Alberta Court of Queen’s
Bench to for a grant of administration. The Estate Administration Act sets out who can apply and, if more than one person is interested,
who will have priority.
Generally a spouse or adult
interdependent partner (“AIP”) of the deceased will have first priority, then a
child, grandchild, other descendant, parent, sibling, and so on. A person with
priority can also nominate another person, and that nominee will retain
priority. So, for example, a spouse’s nominee would have priority to apply to
administer the estate over the deceased’s child.
While not necessarily particularly
complicated, a court application will add time and expense to the
administration of the estate.
Who will inherit?
Without a valid Will, the deceased has no
say in the distribution of his or her estate. Instead, the distribution of
assets will be strictly governed by Part 3 of the Wills and Succession Act.
Under the Act, if the deceased leaves
behind a surviving spouse or AIP but no descendants, the entirety of the estate
will go to that surviving spouse or AIP. If there is a spouse or AIP and all of
the deceased’s descendants are also descendants of the surviving spouse or AIP,
then again the entire estate will go to the spouse or AIP.
Where things get complicated is where the
deceased leaves behind, for example, a spouse and children of a previous marriage.
In that case, there will be a division of assets between the spouse and the
children. The spouse will be entitled to the greater of 50% of the estate or
$150,000.00. The remainder of the estate will be divided among the deceased’s
descendants “per stirpes” (which is explained below).
It is also actually possible for an
individual to die leaving both a surviving spouse and a surviving
AIP. This would occur where the deceased separated with their spouse prior to their death but did not actually divorce that spouse, and
then formed a new relationship which satisfied the definition of an AIP set out
in the Adult Interdependent Relationships Act.
In those circumstances, if there are no
descendants, the surviving spouse and AIP will share equally in the estate. If
there are descendants, the surviving spouse and AIP will split the greater of
half of the estate or $150,000.00.
If there is no surviving spouse or AIP,
the estate will be shared among the deceased’s descendants per stirpes. What
does per stirpes mean? It means that the estate will be divided into as many
portions as there are surviving children and predeceased children who
left surviving descendants (that is the deceased’s child passed away but gave
the deceased surviving grandchildren). Each surviving child of the deceased would then take one of these
portions, and the grandchildren of a predeceased child would share their
parent’s portion.
To illustrate, imagine a deceased had two
descendants, one who survived the deceased and one who died leaving two of his
or her own grandchildren. In that case, the surviving child would receive 50%
and the two grandchildren would each receive 25%. In this way, each “child”
receives an equal share, even if it is through their own descendants.
The final possible situation is that a
deceased dies leaving behind no spouse, no AIP and no descendants. In that
situation the estate will go in its entirety to the following individuals, in
descending priority:
- the deceased’s parents;
- any descendants of the
deceased’s parents;
- the deceased grandparents or
their descendants.
Conclusion
As you can see, dying intestate means a
lack of control over the distribution of assets. Beyond simply not being able
to choose their heirs, the deceased also loses out on all the potential
advantages that come with a good estate plan.
For example, when planning ahead of time,
an individual can strategically decide how to distribute his or her assets on
death to minimize taxes and maximize the benefit to their heirs. When dying
intestate, there is no flexibility to do this kind of preemptive tax planning.
Intestacy also adds potential stress and
cost to family members by requiring them to apply for a grant of
administration. Until a grant is obtained, no one can deal with the deceased’s
assets. This can be a serious issue where the deceased held all the family
assets solely in his or her name and family members depended on that person for
financial support. That time lag could have serious consequences.
We therefore strongly recommend that all
individuals prepare Wills, especially where they have a complicated family
situation or have dependants who rely on them for financial support. As
discussed above, a lawyer can help make sure you meet all the necessary legal
requirements for creating a valid Will, avoiding all of the issues that
come along with intestacy. Early and well-advised estate planning can also have
a myriad of other benefits.
Any of the members of our McLennan Ross
Wills & Estates team would be happy to discuss your estate planning needs
with you.
