Are you dealing with inheritance planning in Ontario, and you are wondering if you should use a Will or a Trust?

When we talk about the tools to manage and distribute your estate, wills and trusts are the two most prominent options. They’re like the two rival teams in a football game, each with their own unique strengths and strategies, and each suited to different circumstances. So, which is better: a will or a trust? That’s the question we’re going to explore today.

First, let’s consider a will, an age-old tool that is straightforward and easy to comprehend. Creating a will is like writing a heartfelt letter to your loved ones, setting down your wishes and providing for those you leave behind.

A will is an official legal document that outlines how you want your assets distributed after you pass away. It’s under your name, your rules, your wishes. But what makes it truly distinctive is the freedom it gives you to express your preferences without many restrictions, apart from legal ones of course.

However, wills also have their limitations. For one, they only come into effect after you’re gone, and they need to go through probate. The word “probate” might sound as exciting as watching paint dry, but it’s an essential process that authenticates a will in Ontario.

Information becomes a public record

This process can sometimes be lengthy, and costly, and all the information becomes a public record, leading to a lack of privacy. Imagine your neighbour knowing exactly how much you left to whom – not the best scenario, right?

Now, let’s pivot to trusts. Picture a trust as an invisible, secure box where you place your assets for protection and distribution. Unlike a will, a trust comes into play the moment you create it. It’s like having a trusted friend, the trustee, who will take care of your assets and distribute them according to your instructions, either while you’re alive or after your passing.

Trusts offer a degree of control that wills do not. For instance, you can stipulate that your children will only receive their inheritance when they reach a certain age or upon meeting certain conditions.

One of the greatest advantages of a trust is that it avoids probate. Your assets can be distributed immediately and privately to your beneficiaries upon your death. Yet, it’s not all sunshine and rainbows with trusts. They can be complex to set up, often requiring the assistance of an attorney, and can be more expensive upfront than creating a will.

Which one wins the match: a will or a trust?

Honestly, it’s like asking whether a striker is better than a goalkeeper. Each has its unique role and importance. A will may be the better choice for you if you have a smaller estate, desire simplicity, and don’t mind the probate process. It’s simple, cost-effective, and ideal for those who don’t have a lot of specific requirements about how their estate should be managed after they pass away.

On the other hand, a trust could be the star player if you have a larger estate, complex distribution wishes, or a desire to maintain privacy. It’s like a tailored suit, customized to your needs, taking into consideration your family dynamics, financial circumstances, and personal wishes.

In some cases, you might find that having both a will and a trust makes sense. This duo can work together, complementing each other’s strengths and covering for each other’s weaknesses. In this team, the trust can manage and distribute your most valuable assets, while the will takes care of any leftover assets, often referred to as a “pour-over will”.

What is a trust?

A trust divides the ownership of assets into legal ownership and beneficial ownership. A settlor puts assets into the trust, a beneficiary receives the benefit of the assets in the trust, and a trustee manages the assets in the trust. Trusts are generally used to give the beneficiary the benefits that derive from the assets in the trust without giving them legal control of the assets.

There are basically two kinds of trusts: testamentary and inter vivos. A testamentary trust is a trust created by a Will that arises upon an individual’s death. Further, an inter vivos trust (also known as a living trust) is a trust created by a settlor while he or she is still alive.

A trust can act as a Will by providing for the distribution of the settlor’s property after his or her death to the named beneficiaries of the trust.

Do you need a lawyer to prepare a Will?

 While there is no requirement to use a lawyer in preparing a Will, it is recommended. A lawyer will ensure that your Will is drafted and executed properly and will ensure that it fulfills your wishes.

What is the importance of estate planning?

 If you don’t decide in advance who is to receive your estate, you won’t have any control over what happens to it upon your death. Estate planning is important because it ensures that your assets are disposed of in the way that you want them to be and it minimizes tax consequences. 

Will or a Trust in Ontario?

An estate is everything that an individual owns including land, real estate, possessions, securities, cash, and other assets. Further, an individual’s estate is distributed after their death according to the terms of their Will or if there is no Will, pursuant to the laws of intestacy.

Are living trusts effective at avoiding probate?

 Yes, inter vivos trusts are not probated. Because the transfer of ownership occurs during the settlor’s lifetime, the trust assets do not form part of the settlor’s estate upon his or her death and therefore they avoid probate.

What is the law of inheritance in Ontario?

 How an estate is distributed depends on whether or not the deceased left a Will.

When a person dies with a Will, the estate is distributed in accordance with the Will.

When a person dies without a Will, they are said to die “intestate”. The Ontario Succession Law Reform Act sets out the way that the estate of a person who died intestate is distributed among their relatives.

Also, the deceased’s spouse will receive the first $200,000 The rest will be divided among the spouse and the deceased’s children. If the deceased doesn’t have a surviving spouse or children, their parents are next in line to inherit.

This is followed by their siblings, and then their nieces and nephews.

What is the difference between heir and next-of-kin?

An heir broadly means “one who inherits” or in other words “one who receives anything from another upon their death”. However, in a legal sense, heirs are all persons who are entitled to share in the distribution of an estate. This happens where there is no Will.

Next-of-kin broadly means nearest blood relations. However, in the Ontario Succession Law Reform Act the term “next-of-kin” is used to describe the relation of a deceased who will inherit the estate if the deceased did not leave a Will and they have no surviving spouse, children, parents, siblings, nieces or nephews.

In conclusion, the time between filing the probate application and the grant of probate varies greatly. It depends on the court registry at which the application is filed.

In small cities, the delay can be as little as a few weeks. Whereas in a large city like Toronto, it can take many months.