I am remarried with 3 kids. How do I draw up a fair will?

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By Julie Cazzin with Ed Olkovich

Q. My first wife Marina and I had two kids who are now in their early 20s. Marina died 10 years ago and I am now remarried and have an infant daughter with my second wife. I earn $150,000 annually, own my own home, which is mortgage-free, and have about $250,000 in a registered retirement savings plan (RRSP) accumulated over the years. I have never had a will but feel that I must get one now. What are some key things I need to put into the will? I want to be fair to all three of my kids and plan to retire with a very nice pension in about seven years. Also, would having an insurance policy in my particular situation be a good way of ensuring my three kids each get an equal share of my will? — Robert

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FP Answers. Robert, it’s important to understand that you must first satisfy all your legal obligations when you make your will. Legal obligations are revised by legislation and courts. These statutory requirements include family law, income tax, and Dependants Relief legislation. These laws impose legal duties you must satisfy before you are free to deal with your remaining estate.

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Failing to satisfy your legal obligations can lead to lawsuits against your estate. These claims are costly. Lawsuits can last for years and freeze your estate so no one benefits. Failing to consider your legal duties before you sign your will only invites legal action.

I am assuming:

a. You have no legal obligations to support your adult children from your first marriage. Therefore, they are not dependants. Your duty may be to complete any legally binding promises;

b. You do not have a cohabitation or prenuptial agreement with your new spouse; and

c. Your wife does not need support if you die.

Let’s look at these details:

1. Family law: Each province has different family laws. This means that if you left your married spouse nothing, she could sue your estate for a division of property and support. If you have not adequately provided for your wife, you can expect lawsuits. In Ontario, your wife can be entitled to half the family home, even if you are the sole registered owner.

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2. Income tax laws. If you designate your spouse as the beneficiary of your $250,000 registered retirement savings plan (RRSP), you can obtain a tax rollover. Otherwise, your $250,000 RRSP is included in your income for tax purposes when you die. You will need tax advice to identify options for your designated, such as the RRSPs, investment accounts and pensions. Realize that the pension may be controlled by statutory designations and not by your will.

3. Dependants relief. If your minor daughter were to go to medical school, you may have to support her from your estate until she is self-sufficient. This is an obligation that you must consider in your estate plan or will.

You say you want to be fair to your three children. However, you certainly have larger financial obligations to your minor daughter than to your other adult children.

Life insurance policies create an instant estate that usually have no income tax consequences. You can use this policy to benefit your three children. Having life insurance designated to beneficiaries outside of your will may provide benefits for your adult children. Consider setting up a trust for your minor child with a portion of the life insurance proceeds.

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Once you fulfil your statutory obligations under your local family law and Dependants Relief legislation, you are free to deal with your estate as you wish in your will.

Edward Olkovich is an Ontario lawyer at MrWills.com. He is certified by the Law Society of Ontario as a specialist in estates and trusts law. This information does not substitute for legal advice.

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