9. Canadian Property Law
Both real and personal property may be transferred to another owner through wills and trusts. Although most people think of wills and trusts as a tool for conveying property owned by individuals, property owned by a business often needs to be transferred when the business owner dies. This is especially true for sole proprietorships and partnerships.
A will is a document by which an individual directs his or her estate to be distributed upon death. In Canada, a will must be in writing, signed and witnessed by two people who are both over the age of 18 and are not beneficiaries of the will. In some cases, a notary public may also be required. The testator must be of sound mind and must be aware of the contents of the will when signing. The witnesses must observe the testator signing the document and must then sign the will themselves in the presence of the testator. The will must also be dated.
A trust, on the other hand, is a property interest held by one person or entity at the request of another for the benefit of a third party. For a trust to be valid, it must involve specific property, reflect the person’s or entity’s intent, and be created for a lawful purpose. Trusts are often used when leaving property to benefit children who are under 18 years old, those who are elderly, and people with disabilities.
When planning how to distribute property upon death, it is important to understand the difference between probate and non-probate assets. Probate is the process through which a court determines how to distribute property after someone dies. Some assets are distributed to heirs by the court (probate assets) and some assets bypass the court process and go directly to beneficiaries (non-probate assets). Probate assets generally are subject to inheritance taxes and distribution can be delayed until the court orders the distribution of the assets. In light of these drawbacks, many individuals prefer non-probate assets.