Estate planning without children: tips for singles and couples

These days, Blake Griffith is fielding an increasing number of estate planning questions from singles and couples without children - an often-overlooked demographic group when it comes to estate planning.

“If they’re younger, they’re typically wondering if estate planning is really necessary,” the Calgary-based Sun Life advisor says. “Then there are those who are a bit older and starting to realize they’ll actually have an estate. They’re typically wondering about tax implications and where those assets should go.” 

Wherever you are in your planning journey, there are a few essential things to know if you don’t have children or grandchildren to leave your money and property to.

What happens if you die without a will? 

Don’t put off getting that will executed or updated: Should you die “intestate” – that is, without a valid will – your assets will be distributed according to the inheritance laws of the province or territory where you live. These laws might not necessarily match your intentions. Also, without naming a designated executor, additional costs and delays could erode the value of your estate. 

For example, in Ontario, the Succession Law Reform Act lays out a “priority list” of who gets what if you die intestate and have no children or grandchildren: 

• If you have no children, your entire estate goes to your spouse or common-law partner. 
• If you have no spouse/common-law partner or children, your estate goes to your parents and is divided equally between them. 
• If your parents are deceased, your brothers and sisters inherit your estate. Any deceased brother or sister’s share goes to his or her children. 
• Thereafter, it goes to blood relatives in a defined order of entitlement, known as “consanguinity”.

Naturally, sorting out this situation without an explicit record of your desires can put a lot of pressure on your family and close friends during an already stressful time.

“A will, ideally prepared with a lawyer, will help (your estate) settle quicker and ensure your assets go where you want them to,” says Griffith. 

Creating a will for the first time? Here are 5 things to consider when writing your will.

How do you choose an executor for your will?  

While many people choose adult children as executors, estate planning without children requires considering other trusted individuals. 

If you have no children, you could consider another family member or friend. “You want someone with good judgment and preferably no financial conflicts of interest,” says Griffith. “If you know someone with a professional background, that may also help them to best follow your wishes.”

Griffith also recommends appointing a professional executor if your estate is complicated or particularly large, or if your preferred, personally connected choice is too busy or lives too far away to take on the job. Of course, professional executors come with a fee which you’ll want to take into account. 

Learn how to choose an executor for your estate.

What happens if you leave money to charity in your will? 

Leaving assets to a qualified charity creates a double benefit, it:  

• helps your favourite causes and  
• could lower your estate’s tax bill, too. 

A particularly effective strategy is to donate investments such as stocks and mutual funds “in-kind” rather than selling them and donating the proceeds. 

“If you have an investment that’s in a gain position [it’s worth more than you paid for it], donating in kind is helpful because it means your estate won’t pay tax on that gain,” says Griffith.  

In the case of in-kind donations, the charity would get the total value of the asset at the time you donate it and would issue a tax receipt for the same amount. Rather than your estate paying capital gains tax on the accrued growth, in-kind donations reduce the capital gains inclusion rate to 0%. This reduces the deemed disposition taxes usually incurred at death. You’ll want to make sure your will gives your executor the power to make in-kind donations of qualifying securities to take advantage of this tax saving opportunity. 

If you plan to donate an investment that’s lost value, however, Griffith suggests selling and donating the cash. That way, your estate can use the loss to offset gains elsewhere. 

This raises the question of how to ensure your charitable donations are made as tax-efficiently as possible after your death. The easiest way is for you to include instructions (and set aside funds) in your will for your executor to follow and pay for financial and tax advice. 

Learn how to make the most of your charitable donations.

Planning your estate with RRSPs and TFSAs 

Whatever your circumstances, you also have meaningful opportunities to direct your registered accounts exactly where you want them – in ways that can help maximize what you leave behind and reduce what goes to taxes.

RRSP beneficiary options when you don’t have children 

Investments in your registered retirement savings plan (RRSP) automatically transfer to your spouse tax-free upon your death if they contribute it to their own RRSP. But RRSP payouts are fully taxable in the deceased’s hands when you leave them to almost anyone else. That includes your estate, where the CRA will add your RRSP’s full market value to your income in the year of your death, setting up a potentially daunting tax bill. 

If you don’t have a spouse, child, or someone else to designate as your beneficiary, charitable giving may once again be an attractive option. You can designate a charitable organization as either a full or partial RRSP beneficiary. 

“Often your RRSP is the best asset to consider donating to charity, because you can either reduce or completely eliminate the taxes on it,” he says. Indeed, your estate can claim a tax deduction for charitable gifts totalling as much as 100% of your net income in the year of your death. You can even carry it back into the year prior to your death to reduce taxes, if you can’t use it all in the year of death.

TFSA beneficiary options when you don’t have children 

Tax-free savings accounts (TFSAs) are a bit simpler: You can name your spouse/common-law partner a “successor holder”, which means the account will switch to their name without going through the estate. This way TFSA’s assets will keep growing tax-free.  

Learn more: What’s the best way to leave your TFSA to your spouse?

No spouse? You can leave the assets, tax-free to a designated beneficiary, who may contribute the money to their own TFSA if they have enough contribution room still available.

Do you need insurance if you don’t have dependents? 

If you don’t have children or other dependants, having insurance coverage besides life insurance – such as disability insurance, critical illness insurance, personal health insurance and long-term care insurance – may be more important. 

“Typically, aging parents get help from their children, so long-term care insurance is important if you don’t have kids,” says Griffith. “(Long-term care) policies pay a regular, income-style benefit to ensure that if you can’t care for yourself, you have the help you need to sustain the lifestyle you want in retirement.” 

Whatever your circumstances may be, a solid estate plan is crucial to ensuring you can shape and direct your legacy the way you wanted. Whether you’re exploring estate planning as a single or couple without children, an advisor can help you make informed decisions.