In this financial feature, I would like to share a story about a couple who thought they had everything properly in order with respect to their Wills and Estate. After passing away in a tragic accident, however, the outcome ended up radically different, then their intentions. My hope is that, after reading about it, you will review your own situation to make sure that the same could not happen to you and your family.
For privacy purposes, I have changed their names for this article. We’ll call them Mr. and Mrs. Smith.
The Smiths had their Wills drawn up several years ago. They had successor owners and beneficiaries listed on their RRIFs and TFSAs, and everything seemed to be in place to ensure that the end recipients were who they intended.
This was a second marriage for Mr. and Mrs. Smith. They married each other later in life, after they had already raised two children each, from a first marriage. Mr. Smith had two adult children and Mrs. Smith had two adult children.
They each listed each other as beneficiaries on their RRIFs, and their own respective children as beneficiaries as contingent, should they die together. It was pretty simple and straightforward, they did everything as they should have. They each intended to have their own two children inherit the funds, should they pass away at the same time.
Years later, they died suddenly in a tragic accident. Common sense tells us at this point that the proceeds of their accounts should go to their respective children as intended: Mr. Smith’s RRIF and TFSA assets to his children and Mrs. Smith’s RRIF and TFSA assets to hers.
The Wills were located and given to me so we started the Estate settlement process. This is where things took a turn for the worse. Neither of their Wills (written by different lawyers) included a survivorship clause. This turned out to be an extraordinarily unfortunate oversight in their case, due to the four children not all being siblings.
Although Mr. and Mrs. Smith died on the same day, Mr. Smith died about 10 hours later than Mrs. Smith. She died immediately and he later died in hospital. In the eyes of the law, he survived her. There was no time period stipulated in her Will that had to be satisfied, for that survival. In the eyes of the law, all her assets flowed to him during that 10 hour period. When Mr. Smith died later that day, his own beneficiary designation took effect and now all of both Mr. and Mrs. Smith’s assets flowed to Mr. Smith’s two children, leaving Mrs. Smith’s children with nothing.
As their advisor, I knew this didn’t accord with their wishes, as we had talked about a similar scenario specifically years ago, when we set up the accounts.
Unfortunately, what at first seemed like a very simple Estate settlement, has left a divide between the two sets of children. I won’t get into how the children have tried to rectify this situation between them, but want to stress one important point. Don’t take for granted that if your Will is drawn up by a lawyer, everything will happen exactly as you intended. These two different lawyers didn’t take the time to really “know their clients”. If they did, the all-important survivorship clause would have certainly been included.
It’s a learning experience for us all. I personally have checked my Will, as I also have children from a first and second marriage.
As a business, specializing in Wealth Planning, we have implemented a new practice at our firm, asking people to bring in their Wills and Powers of Attorney so we can scan and review them. If we can save even one family from this type of disaster, it’s well worth the effort.
Now, I am not a lawyer nor am I an expert in that field. I do, however, have a good understanding of what should be in a Will, and can perhaps raise a question here or there that should be further discussed with a lawyer to try to prevent these things from happening in the future.