Intestate? Biz may not go to family
In the normal course of events, as we grow older, have a family or grow long-term friends and accumulate assets, our thoughts turn to making a will so that our loved ones are cared for in case of our death. However, many people die without a will (“intestate”), and therefore certain rules apply.
Contrary to popular belief, the government doesn’t necessarily get more in estate taxes if you die intestate. However, your spouse, whom you may want to leave everything to, may only obtain a limited portion (the first $200,000 of your assets in Ontario) and then a split of your remaining assets with your offspring. These laws change according to each jurisdiction (province) in which you reside.
From a business perspective, if you are the owner of a sole proprietorship or hold shares in a company, it is extremely important to have a will that sets out to whom these oftentimes very valuable assets go to when you die. If you die intestate, the estate becomes the pseudo-owner of the business assets or shares and then someone — usually a court appointed executor — has to decide how to dispose of the accumulated wealth. This can lead to a huge amount of discord among surviving family members and oftentimes lead to expensive and permanent damaging litigation. It’s true that death and money do strange things to even the closest of family members.
Or if the shares are owned in a closely held private corporation, the shareholders may have drafted a shareholders agreement. Contained in the agreement should be a provision that requires the shares must be sold back to the company at a fair market value upon the death of the shareholder.
Relieve your business partners of the burden of a family feud: The few hundred dollars in legal fees for a basic last will and testament is a smaller cost than a potential battle in court.
Jeffrey D. Cowan, B.A., B.Comm, LL.B., M.B.A., is the principal of Cowan & Taylor, Barristers & Solicitors which practises in the areas of business and real-estate law. Cowan appears in Your Money every other week. E-mail firstname.lastname@example.org call 416-363-5046 with questions for future columns. Information contained in this article should not be relied upon as legal advice.