More Canadians are living by themselves now than ever before. In 1981, 1.7 million Canadians lived alone.[1] In 2021, this number rose to 4.4 million.[2] Today, single Canadian households make up 29 per cent of households countrywide.[3]
Contrary to what one might expect, creating an estate plan for a client who is kinless is not any less challenging than creating one for a client who has a spouse and/or children; rather, the planning can be much more intricate and involved. With greater freedom to dispose of their assets as they see fit, and with fewer (or no) obligations to dependants, kinless Canadians often require a fairly customized estate plan, which can increase estate planning costs.
In this two-part series, we discuss general considerations (Part 1) and special issues (Part 2) that can arise when preparing wills and powers of attorney for kinless-Canadian clients.
In Part 1, we write about managing the costs of planning and choosing the right executor and attorney for substitute decision-making.
We begin with a question commonly asked by kinless Canadians: Why should I make an estate plan if I do not have a spouse, children or other dependants to provide for?
First, why plan?
Making an estate plan is arguably more important for kinless Canadians, because they do not have dependants.
When a person dies without a will, their province’s intestacy rules dictate the beneficiaries who will inherit their assets. These rules generally provide that spouses and children of the deceased are entitled to inherit the estate. For kinless Canadians, the default heirs will be their nearest next of kin (such as parents, siblings, grandparents, or nieces and nephews, etc.) who are then living.
These default beneficiaries may not necessarily be the persons with whom the deceased had the closest relationships or whom the deceased would have wanted to benefit from their estate. For example, some clients wish to leave their assets to friends or to a charity, which intentions would not be fulfilled without a valid will to that effect.
Incapacity is another concern and one that is often overlooked by the public. It is estimated that the number of Canadians living with dementia in 2050 will be triple the number in 2020.[4] When a person becomes incapable and does not have a power of attorney for property in place, the person’s assets are generally frozen until a court order is obtained to appoint a guardian for property, which is often time-consuming and expensive. For personal and health care decisions, without a substitute decision-maker in place, delays can arise until a family member or a friend is authorized to make decisions on the incapable person’s behalf, and the medical decisions made by that substitute decision-maker may not align with the decisions that the incapable person would have made themselves if they were capable at the time. Ensuring a trusted person is appointed in the event of incapacity enables that person to step into action sooner rather than later and to give effect to your wishes and instructions.
Managing the costs of planning
Kinless Canadians, who do not have financial obligations to spouses, children or other dependants, have greater freedom and flexibility over the gifting of their assets on death. Greater options can mean more bespoke estate plans, which may come with greater planning costs.
Before a client’s first meeting with a lawyer, clients should consider their potential key decision-makers (e.g. executors, attorneys, even pet caretakers) and potential beneficiaries (e.g. partners, friends, relatives, charities, etc.). Thinking ahead can save time in discussion with the lawyer and reduce legal fees.
If the goal is reducing cost or simplifying the administrative burden on the executor, clients should strive to keep their estate plan as simple as possible. For example:
- For personal effects: Rather than stipulating which items pass to which beneficiaries (e.g. Susie receives X necklace, Syed receives Y painting, etc.), a will-maker might consider making a non-legally binding letter of wishes that is separate from the Will and given as guidance to the executor. A letter of wishes can also be updated from time to time without needing to update the Will with a lawyer each time.
- For smaller gifts of money to minors: Depending on the sum, a trust for the minor may not always be suitable when the cost of running the trust is taken into account. Depending on the circumstances, it may be appropriate to leave a smaller sum to the minor’s parent with a non-legally binding wish that the parent hold or use the sum for the child’s benefit until the child attains the age of majority.
- Think: “Have I prepared my estate plan in such a way that it can withstand the passage of time, or will it need to be updated frequently as assets or circumstances change?” Real estate may be bought and sold, bank and investment accounts may be opened and closed, corporations may be incorporated and wound down, and so on. Rather than listing which specific assets pass to specific beneficiaries, it may be more practical to think of the estate as a pie and to consider which portion or percentage of the pie should pass to each beneficiary. Similarly, consider whether the appointed executor(s) and attorney(s) are likely to be alive and capable to carry out the job given, and whether alternative executors and attorneys are appointed in case the first-named appointee is unable or unwilling to act for any reason.
Of course, no single estate plan can predict or withstand every change in the future, and estate plans should be reviewed regularly and updated as necessary. Thinking “less of the trees and more of the forest” can simplify the planning instructions, lessen the administrative burden on the executor or attorney, and reduce legal fees.
Choosing the right executor and attorney
Of all decisions that a client has to make in an estate plan, one of the most critical decisions is choosing the right executor(s) and attorney(s).
Generally, the ideal executor fulfills the “three T’s”:
- they have the will-maker’s trust;
- they have the time to do the job (and they have “time on their side”); and
- they are in the same territory (e.g. resident in Canada, if not in the same province as the will-maker).
The same can also be said of the ideal attorney acting under a power of attorney and of the ideal trustee acting under a trust. Kinless Canadians should think carefully about appointing someone who not only fulfills the “three T’s” but, in the absence of a deep familial or dependant relationship, is also sufficiently incentivized to assume this responsibility.
The following questions may be helpful when choosing an executor or attorney:
- Could a partner, sibling or friend act as executor and attorney? If persons of your generation are themselves elderly, are there younger family members (such as nieces or nephews), neighbours or children of close friends who might be suitable?
- Does the will or power of attorney provide for compensation at a level that is fair and would motivate the appointee to accept the job(s)?
- Have you spoken to the executor or attorney and are they willing to assume the role(s)?
- Have you briefed the executor or attorney on your instructions and wishes ahead of time to avoid any surprises?
- Have you taken any steps to organize your estate to lessen the burden on the executor or attorney?
- Have you considered whether a trust company might be appropriate where the estate is complex or there are no suitable candidates who fit the “three T’s”?
Giving consideration to the above can reduce the planning costs for the client and costs later borne by the estate, and ensure that a proper plan is in place to give effect to the client’s instructions and wishes upon death or incapacity.
This concludes Part 1 of our two-part series on estate planning for kinless Canadians. In Part 2, we will discuss special issues for kinless Canadians, such as leaving assets to minors, making gifts to charity, and providing for pets.
Should you have a question about this article or would like to get started on an estate plan or update an existing one, please contact Stephen Hsia (in Vancouver) or Honor Lay (in Toronto) or another member of Miller Thomson LLP’s Private Client Services group in your province.
[1] Zimonjic, Peter. “Number of singles, common-law relationships and roommates rises as Canada’s households evolve.” CBC, 13 July 2022.
[2] “Census Profile, 2021 Census of Population Profile Table.” Statistics Canada, Accessed 29 December 2022.
[3] Although this figure includes a high number of older Canadians, we have written this article specifically for the subset of kinless Canadians (including seniors) who have no spouses or children.
[4] “Navigating the Path Forward for Dementia in Canada: The Landmark Study Report #1.” Alzheimer Society of Canada, Accessed 29 December 2022.
