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Financial planning tips

February 21, 2012

How to write a will with your spouse

When it comes to estate planning, there are a number of different factors to consider when choosing the best type of will for your needs.

If you are part of a couple, much of your life is a joint venture: You may own property with your partner, raise children together and share common assets. Acting in partnership often brings benefits you wouldn’t have on your own. But when it comes to the difficult question of estate planning, how can your wills best work together?

“Estate planning means planning for your death in an efficient way that costs as little as possible and makes sure the right people get your money,” explains John Coupar, a partner with Horne Coupar lawyers in Victoria, BC.

Coupar, who specializes in wills, probate and estate administration says married or common-law spouses have options when it comes to estate planning, with the most common being a mirror will, which he says 99% of couples choose.

Mirror will

“It is quite common for spouses to prepare wills that mirror the terms of the other,” says Chelsea Wilson, an associate focusing on estate planning with Ramsay Lampman Rhodes in Nanaimo, BC. One common distribution scheme, she says, is for each spouse’s will to provide that the estate goes to the other spouse, but if the spouse predeceases him or her, then the estate is to be shared equally by their children.

Where things may get more complicated is in the case of a second marriage or blended family.

“You will sometimes have clients who sit before us, husband and wife, who will raise the issue and say, ‘Yikes, what happens if I die and my spouse remarries?’” says Coupar. “In fact, that happens every day.”

Mutual will

The possibility of a mutual will — two documents signed by two individuals who agree not to amend or revoke the wills in the future — could arise in the case of a second marriage, if one spouse has children from a first marriage and wants them to receive his or her estate.

But Coupar says he tends to steer clear of the “minefield” of mutual wills, as they can create acrimony, litigation and expense.

Joint will

Similarly, while some couples think that it might be more efficient and cheaper to create a joint will (one document signed by two people, which acts as a will for both) Coupar explains that joint wills are off the table in most Canadian provinces because of the added cost, lack of precedent and potential problems.

“There are virtually no advantages to joint wills and a huge bunch of disadvantages, so we don’t deal with joint wills,” says Coupar.

Spousal trust

For people concerned about leaving their assets to their chosen beneficiaries, a better alternative to a mutual will is a spousal trust, says Wilson. The spouse receives an interest in the will-maker’s assets during his or her lifetime but the remaining interest in the trust assets goes to the will-maker’s children after the spouse’s death.

“No clients do joint wills. Very few do mutual wills, most do mirror wills and within the context of ‘how do I protect this money for my kids,’ I would say the trust is probably the most common vehicle,” says Coupar.

While there are no major disadvantages to a spousal trust, some considerations include:

1. Cost: With a spousal trust, a trustee has to be appointed and a tax return has to be filed every year. While spousal trusts are available everywhere in Canada, their statutory and tax treatment varies from one province to another, says Coupar.

2. Jointly-registered assets: Coupar notes that registering some or all assets in joint names can create a problem if you wish to create a spousal trust. He says, “If you have a house and a bunch of bank accounts owned jointly with your spouse and you die, those assets may leap over the will and belong immediately to the joint survivor. People have to be aware that by transferring assets into joint names — this is more relevant for second marriages — they lose the ability to create trusts or do an awful lot of planning in their will.”

Other alternatives to a mutual will include transferring a percentage of your estate immediately to your chosen beneficiaries or having a lawyer draft a marriage agreement if you decide to remarry.

An important step when preparing your estate plan, says Wilson, is to work together with a lawyer, who will develop a good appreciation of your assets and liabilities, family tree, estate planning goals and other personal circumstances to ensure that you select the appropriate estate plan.

“Wills are technical but easy to put in place and I would encourage everyone to get some advice so they have the options when they make the final decision,” says Coupar.

A Sun Life Financial advisor can provide access to an EFPS specialist. Find an advisor near you.

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