In any situation where you’re crafting a will, making sure you meet all your legal duties is essential, according to legal expert Edward Olkovich. This isn’t just good advice—it’s crucial if you want to avoid potential litigation against your estate.
I recently heard from Robert, who reached out with some questions. He wrote: "I had two children with my first wife, Marina, who passed away a decade ago. Now, I’m remarried with a baby daughter. I make $150,000 annually, own a house outright, and have a $250,000 registered retirement savings plan (RRSP). I’m planning to retire with a decent pension in around seven years. I haven’t drafted a will yet, but I want my children to be treated fairly. Would having a life insurance policy help ensure that each of my children receives an equal share?"
Let’s dive into what Robert should consider.
Legal Commitments to Family:
It’s vital to review any legal obligations you might have towards your family when making a will, as these obligations are influenced by laws that could impact how you distribute your estate. Such laws cover family support, taxes, and Dependants Relief legislation. Ignoring these aspects can lead to costly legal battles that freeze the distribution of your estate, causing more harm than good.
Based on Robert’s situation:
- It seems there are no legal obligations to financially support the adult children from his first marriage.
- There is no mention of a prenuptial or cohabitation agreement with his current spouse.
- His wife should not require additional financial support if he passes first.
Family Law Considerations:
Different regions have their own family laws. For instance, if Robert leaves nothing to his current wife, she might have grounds to claim a portion of the estate. In Ontario, as an example, she could be entitled to half of the family home, regardless of the owner’s registration status.
Tax Implications:
To minimize taxes, Robert might consider naming his wife as the beneficiary of his RRSP to benefit from a tax rollover. Otherwise, the RRSP could be included in his income and taxed heavily. It’s wise to seek professional tax advice to understand all available options.
Dependants Relief:
Robert must think about his young daughter’s future, particularly if there are prospects of her pursuing higher education, like medical school. He might be legally required to provide support from his estate until she becomes financially independent.
Given his wish to be equitable with his children, Robert could consider life insurance, which provides a tax-free sum. This insurance can offer immediate support and might allow him to set up a trust for his daughter, ensuring she receives her fair share.
Once Robert meets all necessary legal duties dictated by local family law and other relevant legislation, he can tailor his will to fulfill his personal wishes.
Concluding Thoughts:
Edward Olkovich, an Ontario-based estate and trust law specialist, reminds everyone that this information doesn’t replace personalized legal advice.
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