The importance of creating a will is generally well-accepted. However, many people do not bother to review their wills on a regular basis, to ensure that the document still meets their needs. An outdated will can create unintended consequences. Most legal professionals recommend reviewing a will every 3-5 years, or after major life changes. Below are seven scenarios that may warrant an update to your will.
1. New Marriage
Many people do not realize that when you enter a marriage, your previous will becomes nullified, unless it explicitly mentions the upcoming marriage. Another common misconception is that all of your assets will automatically pass to your surviving spouse upon your death. If the will is not properly prepared, you may be considered to have died “intestate” (meaning without a will), and it is possible that your partner may not receive all of your estate assets.
2. Raising a Family
Welcoming a new addition to the family brings immense responsibility. It can be an emotional process to plan for your children in the event that both you and your partner pass away, but it is a very important step. Your will should be updated to appoint guardians for each of your minor children, and address their financial needs.
3. Disability of a Beneficiary
If one of your beneficiaries were to become disabled, it would definitely be advisable to review your will. Any inheritance given to them may impact their eligibility for provincial disability benefits. These benefits are usually income and/or asset-tested, so even if you have the good intention of leaving your assets outright to a disabled beneficiary, this may negatively impact their access to important resources. An absolute discretionary trust (i.e. Henson Trust – discussed in my previous blog entry) can help to financially support the beneficiary, while preserving their access to government benefits.
Unlike a new marriage, a divorce does not necessarily cancel an existing will. Depending on where you live, a divorce may revoke any gifts left to your former spouse and their appointment as executor. However, it is important that you review the will to understand the impact of the separation, as it differs from province to province. An update will likely be required.
5. Changes to Your Financial Position
If you find that your financial position and net worth has increased dramatically since the last time you drafted a will, this may be a good time for a review. My rule of thumb is to conduct this review around mid-life, as you are most likely approaching peak earning years, and the wealth accumulation phase has begun. With an increased net worth, some additional tax-planning may be beneficial.
6. Death of an Executor
In the event that your appointed executor pre-deceases you, you will need to change your will to appoint living primary and contingent executors.
Retirement is a milestone that warrants a review of your will, as your goals and needs may change. The focus may transition toward reducing costs (such as taxes and probate fees) at the time of death, in order to maximize the value of the estate for your beneficiaries.
Reviewing your will during major life changes is not often top-of-mind. However, it is important to adjust your will to reflect our changing circumstances, so that your intended outcomes will be fulfilled.