What Happens If You Die Without a Will in Alberta?
Dying without a will in Alberta – a situation known as "intestate" – can complicate matters for both your family and estate. While most of us don't like to think about our own mortality, planning ahead is necessary to ensure your wishes are carried out, and to minimize unnecessary complications and costs for your loved ones.
This blog explores the legal, tax, and debt implications of dying without a will in Alberta, providing insight into how the law works and what the potential consequences might be for your estate and family.
What Happens When You Die Without a Will in Alberta?
In Alberta, if you die without a will, the distribution of your estate is governed by the Wills and Succession Act (WSA). The WSA dictates how your assets will be distributed based on your family structure at the time of your death. Here’s a breakdown of what typically happens:
- Spouse and children - If you're married or in a common-law relationship and you have children, your estate will be divided between your spouse and children. If there are no children, your spouse inherits the entire estate. Where children are involved, your spouse receives a preferential share of the estate (usually the first $150,000), and the remainder is split between your spouse and children.
- No spouse, no children - If you die without a spouse or children, your estate will be divided among your parents, siblings, nieces and nephews, or even distant relatives. The exact distribution depends on which family members are still alive at the time of your death.
- No family members - If no living relatives can be found, your estate may be transferred to the government.
What Are the Tax Implications of Dying Without a Will in Alberta?
While not having a will mainly affects who inherits your estate, there are also important tax implications that can reduce how much is ultimately passed on to your loved ones, including:
- Deemed Disposition at Death - In Canada, when you pass away, your assets are deemed to have been sold at fair market value at the time of your death. In other words, it’s as if everything you own was ‘sold’ to whoever inherits it, at the value those assets had on the day you died. This notional ‘sale’ triggers capital gains tax on any increase in value from when you first acquired the assets. As a result, your estate may owe taxes on investments, real estate, or other capital property—potentially reducing what is left for your beneficiaries if you haven’t planned ahead.
- Probate Fees – It’s important to note that if your estate goes through probate (i.e., the legal process of validating a will and administering an estate) there are fees involved. In Alberta, these probate fees are tied to the total value of the estate, as outlined in the chart below:
Total Value of Estate Probate Fee $10,000 or less $35 Over $10,000 but not more than $25,000 $135 Over $25,000 but not more than $125,000 $275 Over $125,000 but not more than $250,000 $400 Over $250,000 $525
Without a will, settling your estate can take longer, which may result in extra legal expenses. The court may also need to appoint an administrator to manage the estate, adding further delays and costs. - Increased Risk of Disputes - Dying intestate increases the likelihood of disputes between family members, especially if your assets are worth a substantial amount. These disputes can escalate into costly litigation, which can further eat into your estate. In some cases, the taxes and legal fees incurred from these disputes can significantly reduce the assets available to your beneficiaries.
- No Charitable Bequests - Without a will, you lose the ability to leave any part of your estate to a charity or organization. Instead, Alberta’s laws decide who inherits your assets, and charitable gifts are not included unless the WSA specifically provides for them
- Spousal Tax Credit - In Alberta, and in Canada in general, the spousal tax credit allows you to transfer certain assets to a surviving spouse without triggering immediate capital gains tax. However, if no will exists, this option might be further delayed or be more difficult to implement, especially if there are disagreements between the surviving spouse and other family members about how the estate should be handled. A will can help ensure your spouse receives the tax benefits they are entitled to.
What Happens to Your Debts When You Die Without a Will in Alberta?
One important but often overlooked part of dying without a will is how your debts are handled. When you pass away, your debts don’t disappear, they must be paid from your estate before anything can be distributed to your beneficiaries. If you die intestate, the court will appoint an administrator to manage your estate, including settling outstanding debts.
If your estate is solvent (meaning you own enough assets to cover what you owe), the WSA and general estate law set out a specific order in which creditors are paid. In Alberta, the order generally looks like this:
- Funeral and burial expenses: These are generally considered a top priority and must be paid first.
- Debts secured by assets: For example, if there is a mortgage on a property or a car loan, these secured debts must be paid next. If there isn’t enough money in the estate to pay the full amount, the secured creditor may seize and sell the assets (e.g., the house or vehicle) to cover the debt.
- Preferred creditors: Some debts, like certain taxes owed to the government or spousal and child support obligations, may have priority over other unsecured debts.
- Unsecured debts: These include debts like credit card balances, personal loans, and lines of credit. If there are remaining assets after paying secured and preferred creditors, unsecured debts are paid last.
Who Pays Your Debts if Your Estate Can’t Cover Them in Alberta?
If your estate cannot cover your debts, it is considered insolvent. This means creditors may only recover part of what they are owed, and some debts may never be repaid.
In Alberta, family members are not personally responsible for the debts of the deceased, unless they were co-signers or joint account holders on the debt. This means that surviving spouses, children, or other family members are not required to pay the deceased’s debts from their own personal funds.
If the deceased has joint debts (e.g., a joint mortgage or credit card with a spouse), the surviving joint holder may be responsible for paying off the entire debt. If a debt was co-signed by someone else, that co-signer will typically become responsible for the debt after the death of the primary debtor.
What Should You Do to Avoid the Pitfalls of Dying Without a Will?
To avoid these legal, tax, and debt-related complications, consider:
- Creating a Will - A will allows you to direct how your assets should be distributed and can include specific instructions about minimizing tax burdens, handling debts, and making charitable donations.
- Seeking Professional Advice - Consult with an estate lawyer and/or financial planner to ensure that your estate plan is tax-efficient, clearly addresses debt repayment, and aligns with your personal goals.
- Consider Tax and Debt Planning - Work with professionals to minimize capital gains tax at death and address the possibility of outstanding debts, especially if you have significant liabilities.
- A Regular Review - Life circumstances change. You may remarry, have children, acquire new assets, or take on debt. Reviewing your will regularly helps ensure it continues to reflect your current situation.
Dying without a will in Alberta can lead to numerous complications, from legal battles over your estate’s distribution to unexpected tax liabilities and unresolved debts. The absence of a will not only complicates the division of assets but can also delay the settlement of debts, increasing stress for your family and reducing the assets available for your beneficiaries.
By taking the time to create a comprehensive will and plan your estate, you can ensure your debts are properly managed and ensure that your final wishes are carried out. Planning ahead is one of the best ways to protect both your family and your estate.
If you have questions about wills or estate planning, it’s wise to speak with an experienced estate lawyer or financial professional. Contact us today to book your free 20-minute consultation and take the first step toward peace of mind.
