By: Rachel Goldman Robinson, Chair - Wills and Estates Group

Talking about Wills and estate planning is often associated with visions of elderly people planning their affairs toward the end of their lives. But the truth is, once a child is born, putting a proper Will in place is extremely important. The Will does not have to be complicated, but it should contain certain provisions to allow for the child to be adequately cared for both physically and financially. While thinking about these scenarios can be emotionally taxing, having an estate plan ensures that your dependants will be properly taken care of in the unlikely event of an untimely death.

Trusts

A Will would typically contain a trust through which the child would inherit their entitlement. Without such a trust, a child inherits the assets outright at age 18 – an age that many agree is inappropriate to receive large sums of money. The child would have full autonomy over the assets without any protection and likely very little guidance.

A trust in a Will would only be established upon the death of the testator (the person making the Will), as opposed to at the time of signing the Will.

Trustee(s)

A person or a panel of people would be designated and act as trustee(s). The trustee(s) are responsible for ultimate decision-making regarding the assets owned by the trust, while often engaging accountants, financial advisors, and/or lawyers to help manage the assets.

If the trust is established for a minor child, the trustee(s) would have open and continuous communication with the person responsible for the child to ensure that trust assets are available to support the child. We typically advise against naming the same person to act in the roles of decision maker for the child and trustee of the trust, if possible, in order to avoid any conflicts of interest and to allow for proper oversight of the trust distributions.

Timing of Asset Distribution

The trust would contain provisions specifying how income and capital of the trust assets are to be distributed to the child as beneficiary. The trust could, for example, stipulate that a portion of the capital is payable to the child when the child attains certain ages (for example, one-third of the capital is payable at age 25, one-half of the balance is payable at age 30, and the balance is payable at age 35).

In addition to having mandatory distributions of capital, the trust could also contain wording giving the trustee(s) discretion to use as much of the trust income and/or capital as they think is necessary for the benefit of the child. This would help to ensure that the child receives adequate support for necessary expenses such as education, daily living, and health care, while also preserving the capital of the trust assets.

Wording can also be included for distributions to be made to the child upon achieving certain life milestones, such as graduating from university, buying a house, or getting married. If desired, the trust could contain wording restricting the trustee(s) from making distributions in the event that the child needs protecting (for example, if the child has creditor or substance abuse issues). If the child is disabled and receives government benefits such as ODSP, the trust could be worded in such a way so that the child continues to qualify for such governmental assistance.

Minor Children

The Will would also contain an appointment of one or more individuals to have decision-making responsibility of a minor child (or to be guardian of property of the minor child, although this is only applicable if the deceased had been appointed by the court as guardian of property of the minor child previously, which is not often the case). These appointments are only effective if the deceased was the only person entitled to decision-making responsibility for the child or to act as guardian of property for the child. In the rare event that the child is orphaned before age 18 (meaning both parents are deceased), having an appointment in the Will helps to ensure a seamless transition during such a turbulent time. The appointment would normally name a person or a couple to have decision-making responsibility (or be guardian of property) for the child until age 18, and would also contain a list of ordered alternates that would be appointed in the event that someone named is unable or unwilling to act. Sometimes clients ask whether they can appoint multiple people from different families to act in this role. We strongly advise against a shared arrangement because of its disruptive nature.

In Ontario, an appointment in a Will is not permanently binding. It is a temporary appointment that is valid for the first 90 days following death. Within that time, the named person would have to apply to the court to become certified as the permanent decision maker (or appointed guardian of property) of the minor child. Courts give great weight to appointments in Wills and a judge would have to be presented with strong evidence before veering away from the parents’ wishes. Ideally, both parents would have the same panel of people appointed in each of their Wills. If no appointment is made, immediate action has to be taken by the court to appoint someone. This can become contentious and can involve multiple families fighting over who will care for the child without the benefit of knowing the parents’ true intentions. Once a Will is in place with proper appointments, it is important to review these appointments regularly to make sure they are still consistent with the testator’s intentions.

Residence

A Will can enable the testator to provide detailed instructions on how the family home should be dealt with upon death. For example, in the scenario where both parents are deceased and a decision maker or guardian will be appointed, consideration must be given to where such person and the children will live. If the desire is to allow the appointed person to move into the home where the children have been living, the Will could include wording to ensure that the home is retained for a specified period of time, and that such person is able to reside rent-free with the children until that period ends (which can be longer than the date that the youngest child attains the age of 18). Until such time, the expenses for the upkeep of the home could be paid out of the estate assets. When this period expires, provisions can be included for the transfer or sale of the property, either within the family or to a third-party. Not only does this type of planning ensure that the children will have a stable and comfortable place to reside, but it also helps to minimize the chances of fighting among the children at a later date.

Conclusion

Preparing a Will does not have to be stressful, complicated, or costly. The process is an opportunity to reflect on your assets and your intentions and create a plan to protect the people you love most. It is also an opportunity to discuss your wishes during your lifetime with those you will entrust with managing your estate and caring for your children in your absence. Proper planning today will facilitate a smooth transition in the future and will create a secure and comfortable environment for your children.

If you wish to discuss any of the above in greater detail or would like any additional information on estate planning, contact Rachel Goldman Robinson at rgoldman@mindengross.com or any lawyer in our Wills and Estates Group.

The information contained in this article does not necessarily reflect the views or opinions of Minden Gross LLP, or any of its lawyers, employees, or clients, and does not constitute legal advice. This information should not be acted upon without prior consultation with legal advisors.