If you are separated but not divorced, it is quite likely that the distribution of your estate will not yet be impacted. However, many separated individuals choose not to get divorced for a long period of time, and need to understand that they may need to take proactive steps to ensure their estate is distributed in the manner they anticipated.
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For example:
- Have you changed your will? If you haven't, and your spouse is still designated as the sole beneficiary and executor of your estate, they may still be entitled to inherit your entire estate. Some individuals delay changing their will because they are under the impression that they have to leave everything to their spouse; this is not true. To the extent your spouse has a legal claim to a part of your estate, that entitlement will come off the top. But there is no reason why you cannot change your will to indicate that you want the remainder to go to your children (or other beneficiaries). If you have young children, consider setting up trusts in your will to ensure they don't receive the money when they are too young to manage it.
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- Have you changed your beneficiary designations? Again, if your spouse is the direct beneficiary of your insurance, RRSPs, TFSAs, etc, and you don't change it, they could inherit the lion's share of your estate. In many cases, it is best to change the designations to "estate" so that the funds are distributed as set out in your will, particularly where you have young children. It is generally not a good idea to have large sums of money paid directly to beneficiaries who do not have sufficient maturity to manage it (and if they are minors, the provincial authorities will step in to control it, not the trustee of your choice).
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- Have you divided any jointly held assets? Although dividing a bank account may be fairly straightforward, some couples continue to jointly hold larger assets (such as a house or cottage) until one spouse can buy the other out, or the asset is sold. However, it may be recommended that you change the title as soon as possible to read "tenants in common" as opposed to "joint tenants" so that your estate will receive your interest in the asset, not your separated spouse. Again, your spouse may have certain legal rights that must be satisfied before anyone else receives any part of your estate, but that doesn't mean they will receive 100% of your assets.
Speak to an estates lawyer as soon as possible after you separate to ensure that all your documents are up to date, including your power of attorney.
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For more tax and estate planning expertise (or to ask your own question), visit Christine's profile page on GoldenGirlFinance.ca.
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