Are your clients' estate documents in tune with new legal changes?

Recent changes impact will and estate rules for marriage, separation, and common law

Are your clients' estate documents in tune with new legal changes?

The Ontario Estate Legislation (Bill 245) was updated this year, so it’s a good time to check the changes to ensure your clients and their financial plans are still up-to-date.

“The estate legislation has been changed fairly fundamentally in Ontario, which is not an everyday occurrence,” Christine Van Cauwenberghe, Head of Financial Planning at IG Wealth Management, told Wealth Professional. “They didn’t amend a couple of other things that have happened in other jurisdictions, so I think it really underscores that there are pretty significant differences across the country.”

While the Ontario legislation changed on January 1, she said several provinces have updated their estate legislation over the last few years. So, advisors should check it in their jurisdiction and work with their clients to ensure that everything is up-to-date.

Many advisors assume lawyers oversee this, but she recommended that advisors discuss the legal implications with their clients to ensure that everything – including wills, joint accounts, and RRSP, Tax-Free Savings Accounts, and insurance policies and beneficiaries – are current and the legal changes won’t impact the advisors’ recommendations.

“Clients should look at their data every three to five years,” said Van Cauwenberghe, noting that many don’t check their wills for 10 to 20 years, and then are surprised at how out-of-date they are if they’ve named parents or friends as executors, and those have either died or moved on. “If you don’t have any change in your marital or life situation, you may not see the point. But it is amazing how much can change in a relatively short period of time.”

“In the end, the lion’s share of the estate actually doesn’t get distributed according to their will, it gets distributed in a way that was created by the financial planner,” she said. “So, it is incumbent upon the financial planner to raise the issue periodically to make sure that they’ve looked at all of the different parts of the client’s plan and everything is still current.

In Ontario, the new legislation means that marriage no longer revokes all previous wills, as it has in the past.

“That deals with a concept that’s been referred to as ‘predatory marriages’,” said Van Cauwenberghe, adding that had already changed in Quebec, Saskatchewan, and Alberta. “People were marrying elders who were in a very frail state and, when they passed away, their previous will was rendered void, so those people would inherit.

“Now, people who enter into a new marriage will need to update their wills or estate planning documents.”

Common-law partners in Ontario also shouldn’t assume they have any specific rights under this legislation because they don’t. She said that’s different than when, after they’ve been living together for a year, they’re treated like married couples on their income tax forms.

“You could be living together for 30 years and not be entitled to any portion of your partner’s estate unless you specifically take an action, like name a beneficiary of a policy or designate them as a beneficiary in your will. So, it does come as a surprise to people when they find out that they just don’t have automatic rights.”

Van Cauwenberghe noted that’s different than in the western provinces, from B.C. to Manitoba, where common law partners have some property rights after two or three years. “But, Ontario never updated their provincial legislation to give the same rights,” she said.

The new legislated changes also impact the status of separated couples. Previously, a marital separation didn’t automatically impact the estate’s divisions. Now, it can impact how much a former spouse is entitled to, so clients should update their documents – including RRSPs and insurance policies – designated beneficiaries, and financial plans, too. 

“It’s very important, no matter where you live, to have an estate plan that’s customized to meet your union,” she said.

“People shouldn’t rely on whatever the default rule is when planning their estate. They should be taking it into their own hands, and every time they have a major change or major life event, like a change in their marital or relationship status, be updating their documents to reflect that. They shouldn’t rely on the default because it can change and, in a lot of cases, people think they’re entitled to more than they are. You don’t want to be at the mercy of the legislators.”