In Ontario, the 30-day survivorship clause is a common provision in wills specifying that a beneficiary must survive the testator by at least 30 days to inherit any bequests. This clause serves several important purposes in estate planning.
Clarifying Inheritance Rights
Without a survivorship clause, if a beneficiary dies shortly after the testator, determining the rightful heir can become complicated. The estate may pass to the deceased beneficiary’s estate, potentially leading to unintended heirs receiving assets. By stipulating a 30-day survival period, the testator ensures that only those who outlive them by the specified time inherit, thus upholding their intentions more clearly.
Preventing Double Probate
In cases where the testator and beneficiary die close together in time, assets might pass through probate twice—once in the testator’s estate and again in the beneficiary’s estate. This not only increases administrative burdens and delays, but also incurs additional probate fees. A 30-day survivorship clause can prevent this by ensuring the beneficiary’s estate does not inherit the assets, thereby reducing the need for multiple probate processes. Tax deferred is tax saved!
Addressing Common Accidents
The 30-day survivorship clause is particularly useful in scenarios where multiple family members are involved in a common accident. When both parents die in a car crash and the order of death cannot be determined, each parent is deemed to have died last for the purpose of their own will, and so neither parent’s estate inherits from the other parent. However, if one parent dies immediately in the crash but the other survives for another couple of weeks, without a 30-day survivorship clause, the estate could pass to the surviving parent’s heirs, potentially excluding the intended beneficiaries of the first parent to die. The 30-day clause helps avoid such complications by ensuring the estate passes according to the testator’s wishes, even in tragic circumstances.
Income Tax Implications
From a tax perspective, section 70(6) of the Income Tax Act (Canada) allows for a tax-free rollover of property to a spouse or spousal trust if the transfer is made within 36 months of the testator’s death. However, if the spouse beneficiary dies within the 30-day survivorship period and the rollover does not apply, the transfer is considered a deemed disposition for the testator, potentially leading to unexpected tax consequences.
Ensuring Administrative Efficiency
Implementing a 30-day survivorship clause can streamline estate administration. It provides a clear guideline for executors on how to proceed if a beneficiary dies shortly after the testator, reducing potential disputes and delays in the distribution of assets.
Conclusion
The 30-day survivorship clause is a vital tool in Ontario estate planning. It ensures that a testator’s assets are distributed according to their wishes, even if a beneficiary dies shortly after the testator. By preventing unintended inheritances, reducing probate complications, and addressing tax implications, this clause provides clarity and efficiency in the administration of estates. It’s advisable for individuals to consult with legal professionals to determine the appropriate survivorship period for their specific circumstances.
If you would like to speak with an estates lawyer about a survival period appropriate to your own specific circumstances, please contact Robin Hammond at [email protected].
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