During the month of May, Mother’s Day has all of us a little more aware of the amazing women in our lives. We like to shower them in brunches, flowers, and gifts, so hopefully they can understand just how much they mean to us. They are our moms, the mothers of our children, and our best friends. So it only makes sense that, when you craft your personalized estate plan, you put a little extra consideration into protecting your wife’s estate if you should pass first.
Widowhood is a sad reality for many women in Canada. Senior widows, over the age of 65, outnumber their male counterparts 4 to 1. In fact, 45% of women over the age of 65 are widows. To make matters worse, Canadian widows saw a steep decline in their standard of living after the death of their spouse. Many widows suddenly dropped from a middle class standard into low income, but even the 25% of senior women with the highest family incomes experienced a 7.5% decline within 5 years of their spouse’s death.
Protecting Your Wife
Traditionally, many spouses took a direct approach to wills. When one of them died, the surviving spouse inherited the assets of the deceased partner. However, that’s not always the best approach in today’s world. Many spouses, for example, spend years perfectly balancing their incomes to best take advantage of income splitting for tax purposes. If the surviving spouse suddenly inherits the other half of the assets directly, all of those years of tax planning vanish overnight. We recommend considering a spousal trust instead.
Spousal Trusts
These offer substantial protections and benefits to the surviving spouse. Not only are they able to continue income splitting, but the assets in the trust are protected from creditors and predators who may try to financially abuse a widow. The assets in the spousal trust are available to your spouse as she needs them, but they are legally held by the trustee. Therefore any outside forces, like bankruptcy, cannot affect the assets in the trust.
Protecting Your Children
A more and more common type of elder abuse comes in the from of a seemingly-kind younger person, often a caregiver known to the family, who takes a sudden personal interest in a frail senior. They may establish a deep “friendship” with the elder or even attempt to marry them. While Canadians may be more likely to associate a young woman marrying an old man with a predatory marriage, widows are no less vulnerable than widowers. To make matters worse, in Canada a previously written will is considered void as soon as a person marries or remarries. Therefore, the abuser doesn’t even need to convince their senior spouse to rewrite their will, they simply need to ensure a new will is never written until the elder dies. Upon death, the elderly spouse is considered to have died intestate (without a will), and the relevant provincial succession laws will apply instead of their previous will.
By placing your assets into a spousal trust, you have the ability to ensure that, once the surviving spouse passes away as well, all remaining assets are distributed among your children or grandchildren. Having these assets secured in the trust prevents an abusive younger spouse from seizing your children’s inheritance.
At MacMillan Estate Planning, we understand the importance of legacy and protecting your blood line. Our personalized estate plans take into account potential abuses and dangers, and we safeguard your estate from these outside threats. Contact our team today to learn more about our unique approach to life planning and schedule your free consultation.
