Why Update Your Will as an Estate Planning Strategy?

Why update your will as an estate planning strategy? Updating your will regularly is important to ensure you save your beneficiaries from costly and timely litigation after your death. A recent decision in the Ontario Superior Court of Justice demonstrated the importance of this topic. This is a story about a hard-working Ontario farm family consisting of a mother, father, daughter and son.

Changing a Will When Circumstances Change

The father ran the operations of a farm north of Toronto, while the mother ran the administrative side of the business. In 1995 the father was diagnosed with cancer and because he couldn’t obtain life insurance, the mother obtained a $1,000,000 life insurance policy with the daughter and son being named as equal beneficiaries. In 1996, the mother and father purchased a second home that the son and his wife moved into. There was much disagreement in court over why this property was purchased, with explanations that included an investment property, a retirement property or a way to give the son a “head start”.

In 1997, the father became too ill to operate the farm, so they rented out the fields, which generated a monthly income. He died the next year.  After his death, the mother obtained employment and continued to work until her retirement in 2007. After her retirement, it became clear that she would have to sell the farm, as her income couldn’t cover her expenses, which included her expenses to maintain the house her son was living in. In addition, she was paying $26,000 per year in premiums on her million-dollar life insurance policy.

In 2009, the mother was diagnosed with colon cancer which required surgery. She stayed with her daughter during her lengthy recovery and then returned to her own home afterwards.

Why Update Your Will as an Estate Planning Strategy?

The mother first obtained a will in 1998 which left the farm to her daughter and the house to her son. The remainder of the estate was to be divided equally. In 2009, the mother obtained a new will which left each child with a house and the remainder of the property was to be divided equally.

In 2009, the mother discussed her financial situation with her daughter and identified the need to reorganize her finances. The home that she owned, which was occupied by her son was becoming a burden. As were the continued premiums being paid on the life insurance policy. The daughter sent the son a number of options that he could choose from. These included the house being sold on the open market, or being sold to the son for under-market value. In that case the daughter would become the sole beneficiary of the life insurance policy.

In 2011, the mother made a lump-sum payment of $140,000 from which future monthly premiums would be taken to maintain the life insurance policy. After that money was depleted, the daughter would take responsibility to maintain the monthly premiums.

The Mother’s Death and the Uncertainty in the Life Insurance

In 2012, the mothers cancer returned and she died in November of that year. It was only after his mother’s passing that the son found out that the daughter was the sole beneficiary of the life insurance policy, which was paid out. After learning that his sister received the policy, the son went to court to seek half of the policy.

After six days of trial, the Judge agreed with the daughter and ruled in her favour. The important take away here is after the six-day trial, the daughter had spent $125,842 in legal fees. The son paid $41,085 in legal fees. That is an incredible $166,000 in legal fees. All of this could have been avoided with a few hundred dollars in legal fees while the mother was still alive.

Resolve Family Disputes Through Your Will – You Will Save Your Family Time and Money

Why update your will as an estate planning strategy? When you have a significant change in your life, such as marriage, divorce, having children, starting a business, or retirement, take a look at your will. See if you need any changes. The most important thing for you is to ensure certainty with your will and estate. Make everything simple for your beneficiaries upon your death.

Contact Hearty Law for more information. An important aspect of estate planning is ensuring your will is valid and to save litigation costs after your death. It is certain that in this case, the mother would have solved some problems. She would have saved her children from paying over $100,000 from her estate to lawyers.

Hearty Law provides estate legal services in Toronto, Ottawa and surrounding areas. Email toronto@heartylaw.ca or ottawa@heartylaw.ca.

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