Driving in our neighbourhood before 8 a.m. this week I saw a car accident ahead of me. The driver had tried to turn left across three lanes of traffic, the same turn I have to make several times a week. She hadn’t made it safely through. Although blessedly she looked to be ok, as she was sitting upright with her feet on the road, it was obvious she was stunned and upset. The airbags had deployed. Parts of the cars were scattered across the asphalt. It could so easily have been me. And it reminded me that we need to get cracking and revise our will again now that our children are getting older and our circumstances have changed.
What’s the Latest You Should Wait to Write a Will?
At the very latest, you should have a will as soon as you are expecting a child, through birth, guardianship or adoption. It’s very important to decide who could provide for your child or children if you die and having to write names down in a will forces you to start thinking, make a choice, and speak with the person/s you would like to raise your children if you can’t.
Why get the will before the child arrives? Because you have more hours to do what you want in a week before you have a child than you will ever have again. Trust me. You won’t believe how little time you have to call your own after your family expands by just one tiny person.
So, like most parents, we made our first wills before the arrival of our first child.
What Did Our First Will Say About Our Assets and Our Children
When we first set up our will our assets were limited. We owned part of a house; the other part was owned by the bank. We had RRSPs. (TFSAs had not yet been invented.) We had life insurance policies through work that could pay off the mortgage and funeral costs and leave a bit extra behind.
Our net worth was not huge, though. If liquidated and invested conservatively, it would have paid for any needed renovations or upsizing to provide housing for our children at our guardian’s home. It would have paid for their upkeep and any childcare required until they finished school. It would have paid for their higher education. And it might have left them with a little bit to get started.
There wasn’t much need to get fancy about the timing of their “inheritance.” By the time their guardians had used the funds to raise them, there wouldn’t be enough left to make them wait till they were “mature enough” to handle the rest of the money. It wouldn’t be much!
So we had the rather standard clauses about the guardians being able to use the funds as they saw fit to raise our children and any remainder would go to the children at 21.
Why You Might Need to Revise Your Will as Your Child Grows Up
Now our children are about half-way to higher education. Well, a bit less, but still.
Things have changed a lot in the years since that first will.
The most noticeable change, other than in our hair colours, is our net worth. Fortunately, it has grown. Substantially.
The house is paid off. The RRSPs are maxed. The TFSAs are maxed. The RESPs are maxed. The emergency fund and short-term savings funds are maxed. There is no debt. And there are some more savings on top of that. We still have the life insurance but it won’t have to pay for a mortgage and we’ve told our children and relatives that we prefer a cardboard box cremation not some $10 000+ funeral service.
(Yes, we are extremely grateful. Yes, we are contributing regularly to help others who aren’t as fortunate: we’re well aware how a minor injury, an illness, a divorce or any number of common catastrophes can result in destitution and homelessness through no person’s fault. It happens often and can happen to anyone. We believe in trying very hard to give to others.)
Anyway, it means we need to look at our will in a different way.
First, we need to review our choice of guardians. Are they still a couple? Can they still manage to add to their own family if we are gone and our children need parents? Would they need to modify their home to fit our kids in? What kinds of expenses are our children generating and would our assets be able to provide them?
If it seems likely that your guardians may divorce, you should also consider only naming one of them as your children’s guardian. Presumably the one you think would be best suited to the job. Or you can name who should be your first choice for guardians if the proposed couple divorces and you don’t think you want your children put into that situation. (Remember the courts still decide who the actual guardians will be: your wishes are strongly considered but they are not legally binding.)
That part, for us, was fairly easy. Our guardians are still willing and able to take our children. Our children, now old enough to ask, are ok with the idea of them living with these relatives should disaster happen. There is enough money to pay for our children’s expenses, some minor house modifications and so on if needed.
The reality is, there would be a fair chunk of change left over after each child finished higher education.
And that’s why we should consider revising our will.
How Should You Leave the Money In your Will to Your Children?
The first thing to decide is whether all of your net worth should still go to your children if you die. Or do you want some going somewhere else now? To a charity? To another family member or friend? To any grandchildren?
If there’s a possibility that you could be leaving a pretty large amount to your children, consider how you want them to get it. You’ll probably want to give the guardians access to the money to pay the costs for raising them up to and through their higher education. Do you then want to release a percentage of what’s left at different ages? Say 33% at 21, 33% at 25 and 33% at 30?
There’s no “right” decision but you might want to think about it a bit. Maybe even discuss it with your friends and relatives or a financial planner.
If there is a whopping amount, I’m sure you won’t be reading this article. You’ll have your tax accountant and your lawyer working on creating a trust or other vehicle to best manage the money.
What Else Should Be in Your Will?
A guest writer at the Blunt Bean Counter’s website, Kati Basi, has written several articles to point out what needs to be in a will nowadays.
So we’ll make sure to include guidance on the following issues.
Your Will Should Cover Your Electronic Assets
If you have a website, blog, Facebook site, Twitter account and other electronic or social media assets, you should provide directions in your will about them.
For instance, I make a (very very) small income from this website. Without a will specifying who can take this website over, including the domain name and the content, it gets muddy. My service providers will respond better to someone inheriting these assets if they are clearly defined in my will.
Kati Basi discusses this in her article: New Will Provisions for the 21st Century: Your Digital Life
Your Will Should Explain How to Handle RESPs If You Die
If not handled properly, RESPs get collapsed if the contributor/s die: that means the CESG and other grant monies get returned to the government!
You need to cover this in your will. Probably, like us, you will want the guardians to take over the RESPs as the new contributors and to keep the RESPs intact for your children’s future education.
We’ll be clarifying that.
Kati Basi discusses this in her article: New Will Provisions for the 21st Century: RESPs
Your Will Should Cover your Reproductive Assets
Well, this isn’t one we need to worry about. But if you have frozen eggs, sperm or embryos, you do need to include what happens to them in your will. That must be a very complex decision to make.
We’ll Be Updating Our Will: Will You?
So now we have a short list of what we need revised in our will.
It will cost a few dollars of course. But I’m always surprised at how many people balk at paying a lawyer for a will, yet spend $1000 a year for car and home insurance. A will eventually will definitely be used. Your insurance may never be claimed against.
I can see where in another few years it will need to be changed again. Once our children are out into further education or starting jobs they might want no guardian or a different type of guardian. We might want to provide new instructions about where any money should go and when. If they marry, there will be new relatives to consider. And if they have children, we might want to plan for their future too. So I don’t think this is the last time we’ll be changing our will.
Do you have a will yet? Does it cover all of these strange angles? Are there others to consider? Please share your insights with a comment.