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Reader Mail: No Will, Assets Go Where!?

Jimmy sent me an interesting question the other day, something that all us married folk should be thinking about:

For a married couple where neither has a will, how do the assets get distributed? Do they go straight to the other person?

As I am not a lawyer, I don’t have precise answers. However, this is what I understand:

Assets under Joint Ownership

  • These assets will automatically be passed onto the partner tax free. If both partners die at the same time WITHOUT a will, the courts will decide where it goes.

RRSP

  • If you want the RRSP to go to your partner, you must name him/her as the beneficiary of the account. Upon passing, the beneficiary will obtain ownership of the RRSP account tax free. If no beneficiary is named, again, the courts will decide where the assets go.

Everything Else

  • Unless the asset is included in the will, the courts will decide how to “fairly” distribute the assets.

Moral of the story? If you have stuff that you want to be passed onto your spouse upon passing, either make them joint owner, or even better yet, get a will!

That reminds me, anyone know how much it costs to setup a will with a lawyer? How about the DIY kind?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 14 comments… add one }
  • The Financial Blogger June 26, 2007, 6:58 am

    It depends on the province also. Each province has their own laws for people who pass away without a will.

    The worst case scenario is when you have children. 2/3 of most of your assets will go to them and the other 1/3 to your spouse. Think about how selling your house will be difficult for your spouse with minor kids!

    I think that setting up a will is about $400…

  • broknowrchlatr June 26, 2007, 9:06 am

    My father is a mortician and deals with this sort of thing all the time. In the US, everything will go to your spouse if you die and do not have a will. This is the case even if the spouse dies right after you. Kids get an equal share of everything if the spouse is not alive. Here is an odd case to illustrate the complexities (this actually happened):

    A 50 year old man and woman have 3 grown kids. He leaves her for a 38 year old woman with a 18 year old son. They get married and don’t have a will. I few weeks later, they are driving and are in a serious accident and are both killed. After an autopse, it is revieled that he had a heart attack and that is why they crashed. Since niether had a will, the court had to decide where the money went. Since the man died of the heart attack, he was dead a few seconds before she did. So, all of his assets were transferred to her. Then, on her death, her son recieved all of their assets. The man’s 3 kids got nothing.

    After a court battle where the 3 kids claimed that what the man wanted was for them to get it, they were given a share of the money as a settlement.

    The moral of the story is that you need a will and if you get married or divorced, you need to update it. Software is pretty cheap and will help you with the decisions you have to make. Then, getting it notarized will help inforce it.
    But, in the US, soemthing as small as a signed letter on a napkin can be a will (but it is more likely to be disputed)

  • guinness416 June 26, 2007, 11:13 am

    This is on our to-do list too. If you do make a will (either thru a lawyer or a kit), I’d be realy interested in reading a post about it.

  • ThickenMyWallet June 26, 2007, 11:31 am

    As FB points out, it really depends on where you live. In Ontario, its everything to spouse if no kids; if spouse and 1 kid, its 50%/50% and if spouse and multiple kids, the spouse take 33% and the remainder split among # of kids.

    As I understand it, if a RSP has no beneficiary, it goes to the estate and probate is applied. If the beneficiary is the spouse, a spousal rollover applies and no tax is deferred.

    A power of attorney should be obtained in addition to a will in the event the spouse has to control the financial and health affairs of their partner in the event of incapacity.

  • AJ-IAmFacingMillions.com June 26, 2007, 11:43 am

    This will certainly vary from one location to the next.

    Additionally, if both spouses die and there are no children, in many states/regions, it will go to living family members in various orders set by law. It can be a very complex process. If there isn’t much of an estate left, the cost of the process itself can be prohibitive.

    The bottom line, get a will…

  • George June 26, 2007, 12:35 pm

    Ditto the “GET A WILL” comment, but I’d add that it’s a very good idea to get one done by a real lawyer, instead of with a “kit”. It’s money well spent, as it’ll minimize the chances of fights among your beneficiaries. It shouldn’t cost more than $400 to get a pair of wills done. Considering the wills will affect your entire estate (potentially hundreds of thousands or millions of dollars), it’s a fairly low price to pay.

  • Fab June 26, 2007, 3:00 pm

    About the price of a will… I went to my notary a few months ago about that. I was given 3 different prices ($CAD) depending on what you exactly want :
    – ~$450 basic will
    – ~$700 will involving the creation of a company
    – ~$900 will involving the creation of a trust

    I am not very sure about how work the different settings: the difference consists in losing less in taxes in the end.

    Hope that helps a bit…

  • brandi December 30, 2007, 6:01 am

    what happens when a deceased person leaves no will and has alot of debt?

  • George December 30, 2007, 4:16 pm

    Brandi: When somebody dies, their debts get paid out of any assets that the estate might have. The deceased’s debts always get paid first, and any funds remaining from the sale of the deceased’s assets would be paid out to the beneficiaries. This is the case whether there is a will or not – instructions in a will only apply to the estate’s assets AFTER all debts are paid.
    If the debts are larger than the estate’s assets, then the beneficiaries won’t receive anything from the estate. They won’t inherit the debt, though.

    • FrugalTrader December 30, 2007, 5:43 pm

      George, what about the case where the deceased is in joint ownership of a home, and he/she dies with a load of unsecured debt. Can the creditors go after the deceased portion of the home?

  • George December 30, 2007, 6:03 pm

    FrugalTrader: Firstly, IANAL. When a home is jointly owned, the owners (usually spouses) are both 100% owners of the property from day one. When one dies, the property automatically becomes 100% owned by the other joint owner – the home doesn’t form part of the estate. Debts of the deceased would be paid out of his or her other assets.

    This is different from property that is owned as “tenants in common”. If two (or more) people are tenants in common for a property, they each own a share of that property – 50/50, 60/40, 30/30/40, or some other type of split. In this circumstance, if one of the “tenants in common” dies, their share of the property would become part of their estate, and could be used to pay out their debts.

    This is one of the reasons that it’s a VERY good idea to talk to a lawyer when figuring out how property will be owned, and when drafting a will. The rules are complicated and don’t always seem like “common sense”. The rules for property ownership vary depending on the jurisdiction as well.

  • Sue Green October 6, 2008, 10:12 am

    Recently my step mother passed away leaving her son as sole beneficiary and her daughter as a beneficiary to her 4 insurance policies. She and my father had the son, the daughter is by previous marriage. My dad passed away 5 years ago. There was not a Will. But the son states he gets the house and the contents. Without a will wouldn’t this go into Probate? Who is Probate? And how do they know when someone dies? I am sure he (the son) is not going to make any reports. I feel that her and daughter and I have just as much rights to the contents of the house as he does. I know he would get more than we would because he is a product of their union and the daughter and I would get a small portion. But I am sure he is not going to report the death so he can have everything. Can you advise?
    Thank you for your time.

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