A Look at Wills and Estate Plans – What’s included in my estate plan?

What is my Estate?

An estate, when referred to in the financial and legal sense of the word, is an individual’s total assets, minus any of their liabilities(debts). Put another way, it is an individual’s net worth. An estate refers to everything of value that an individual owns— houses, stocks, bonds, cash and bank accounts, collections of art, antique items, family heirlooms, jewellery, insurances, investments, pensions, and all other forms of personal property such as boats, mobile homes and RVs. Additionally, in some circumstances insurance policies, RRSPs, or pension plans and other assets, which can be designated, can also form part of someone’s estate if the designated beneficiary is the estate. However, if those types of assets are designated to someone other than the estate, these assets will not form part of the estate. Instead, those assets will flow directly to the specified beneficiary of that specific asset. This means that these assets, designated to a specific person, would not follow what is instructed in the last will and testament.

There are also other considerations for determining whether property will be excluded from an estate. As mentioned, it is important to determine what property will be excluded from an estate because that property will not be dealt with according to that person’s will. This can result in serious and unexpected consequences when administering and estate or making a probate application. If the individual in question is deceased, their intentions can be difficult to determine in relation to these assets which can flow outside of the estate. This can lead to confusion and division amongst family members already dealing with the loss of a loved one.

Joint Assets

In addition to assets with specified beneficiaries, assets that are jointly owned can also be excluded from the estate. At times, joint assets can allow the executor (also known as the personal representative) to avoid the need for a probate application to administer an estate. This can save time and money in the administration of an estate. Joint ownership of assets is common and can be a useful estate planning tool, if implemented correctly. However, used incorrectly joint ownership can cause problems and confusion, which will increase the time and costs of administration to the estate.

Property owned by spouses is often owned jointly. This is noted on a home’s certificate of title of the property as joint tenants. The implication of joint tenancy is that when one joint owner dies, the property is transferred directly to the other joint owner and does not form part of the deceased person’s estate. This type of transfer occurs because the surviving owner has a right of survivorship in the property.

Utilizing the right of survivorship, jointly held property can allow the executor or personal representative to avoid the need and the cost associated with acquiring a grant of probate. One of the ways this can be done by parents is by adding their children as a joint tenant to their property. While this can be used as an effective estate planning technique, it also has the potential to create problems. For example, there are different legal considerations that apply for adult children and non-adult aged children. If a parent is implementing this type of estate planning strategy, it is crucial to determine if the intent of the parent is to leave the property entirely to the adult child, now jointly on title of a home or other property, or if the parent’s intent is that all beneficiaries of their estate should share that property according to the parent’s will. There are valuable reasons for a parent to have their adult children hold property in such a manner but doing so without proper legal guidance can create numerous complications.

In some cases, transfers of property into joint names have resulted in lengthy and contentious court challenges.  For example, in one Alberta case Pohl v Midtal, 2017 ABQB 711 a parent was unable to remove their adult child as a joint tenant to property that they had previously added. When they had initially added the child, for estate planning purposes, their relationship with that adult child was positive. Subsequently, the relationship soured, and the parents attempted to revoke that adult child’s joint tenancy from the property. The court ruled that they were not permitted to do so.

Another case, Coates v Coates, 2017 SKQB 303 involved a mother who added her four children as joint tenants to the title of some of her properties. One of the children racked up debts and a judgment was issued against him. The child’s creditors registered their judgment for payment of the child’s debts against the jointly held property, and ultimately forced the sale of that property for the payment of the debt.

If you are considering adding your child or another person to your property as a joint owner, we invite you to seek legal advice prior to effecting that change, to review all of the risks involved, and the options available to create the estate plan that best matches your wishes. Alternatively, if you believe a loved one’s estate is not being properly administered, we would be happy to review the administration and advise you of your options.

McCuaig Desrochers, has been assisting Edmontonians and Albertans for 125 years. Our team of estate lawyers can assist in the planning and the drafting of your estate. We are also available to assist in an application for probate or administration, or to challenge someone else’s improper administration of an estate.

This article was written by Patrick Coones. Patrick is a lawyer at McCuaig Desrochers LLP.

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