For the purpose of this article, I group both married couples and unmarried ‘common-law' couples under the term “spouse”. Individuals who enter new committed relationships face special considerations when making their Wills, especially if one or both partners have children from prior relationships. Spouses should understand the options available to ensure that prior children are cared for adequately along with the new spouse and any new children together.
To start with, while it is possible to leave one's estate entirely to a new spouse, this may not be suitable. Doing so would make it uncertain what, if anything, the predeceased spouse's children from a prior relationship would eventually receive. The estate may be largely used up by the surviving spouse over their remaining lifetime, especially if they pay for a retirement home or special care costs.
Also, spouses may at any time independently change their Wills, without notice to each other. A surviving spouse may later amend their Will so that step-children are no longer beneficiaries. Even where spouses intend step-children to inherit upon both their deaths, it is often the case that surviving spouses update Wills and exclude step-children. This is especially common in later-in-life relationships, where the new spouse is distanced from grown-up step-children; in contrast with new spouses who were involved in raising young step-children and maintain a close parental bond. In any case, be aware of the possibility that if your prior children do not benefit upfront, they may never see any benefit, should their parent's estate be left entirely to a new spouse.
A parent in a second relationship may instead want his or her Will to allocate some amount for prior children upon his or her death, before leaving the remainder (the “residue”) to their surviving spouse. But be mindful that joint accounts with a spouse automatically pass by right of survivorship to the surviving spouse on death. Therefore, the money from such accounts will not be available as part of the estate to satisfy gifts to children. A new spouse may share the money voluntarily with step-children, but has no obligation to do so. If the parent has no solely-held account from which their estate can pay out gifts to children, or wishes to avoid probate on such an account, there is another option. The parent can provide for prior children by designating them as beneficiaries of a Tax-Free Savings Account (TFSA) or a life insurance policy. Adult children who are designated beneficiaries can claim those funds on their parent's death directly, without having to go through the estate that passes to the spouse. However, minors should not be designated as beneficiaries of such funds without a trustee.
On the other hand, sometimes providing adequately for a surviving spouse takes precedence over leaving an immediate inheritance to children. Leaving substantial gifts to children upfront may result in insufficient residue for the surviving spouse to continue living on, especially into old age. Therefore, it may be practical to simply leave the estate to the new spouse in full. Also, adult children with established livelihoods are less dependent on an inheritance, and it is less pressing to provide for them ahead of the surviving spouse, than for younger children.
There is another option to provide for a spouse aside from an outright gift. Your will may specify that you leave your estate or a portion of it in the care of a trustee, who will pay out some amount occasionally to the spouse, and you can direct who receives any balance leftover at the surviving spouse's death. However, this does require additional work by the executor, including tax filings, and prolongs the estate administration.
There are also options relating to the home. Spouses may own as ‘joint tenants', meaning that the house passes to the survivor of the two. It ultimately falls entirely into the survivor's estate, and passes per the survivor's Will. This means that the value of the house does not become part of the predeceased spouse's estate, and will not be governed by their Will. Therefore, a predeceased spouse cannot use the house's value to satisfy gifts to their children or their own family - it has passed automatically by right of survivorship to the spouse.
You do not need to own as joint tenants. Title can also be registered to both spouses as ‘tenants in common'. This means that each spouse would have a discrete ownership interest (50/50, or some other proportion) that can fall into each one's estate upon death, and be governed by the respective spouse's Will. Unlike joint tenancy, tenancy-in-common means that a predeceased spouse's ownership interest does not automatically pass to the surviving spouse on title. This may be appropriate if each spouse has contributed to the equity and wishes to divide the value among each side of the family. When the last spouse ceases to live there and the property is sold, each spouse's Will can direct the respective portion of the proceeds to benefit each one's children or family members.
If title will be held as tenants in common, or by only one spouse, it may be appropriate for an owning spouse's Will to give the surviving spouse the right to continue to occupy the home. Consider whether the surviving spouse should be responsible to pay the carrying costs, like property tax, during the time of occupancy, and whether they can afford that in the long term. Alternatively, the predeceased owning spouse's estate would have to set aside a sum from their estate to cover expenses for the duration of the survivor's occupancy.
These are some of the basic considerations, and not all may be applicable to you depending on your circumstances. There may be additional considerations; for instance, whether the transfer of assets to a spouse or child will attract probate, and whether it is advisable to attempt to avoid or minimize probate fees. This article is intended as a starting point for further thought and planning with a lawyer. If you are in a second relationship or have step-children, and are planning a new will, you are welcome to contact me for advice appropriate to your situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.