4 Things That Could Happen To Your Financial Assets If You Pass Away

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From RRSPs, investments, to emergency savings, or even a car – there’s a good chance that you own some assets of financial value. Whether they’re big or small, we’re willing to bet that you’ve worked hard to earn those assets. 

But have you ever wondered what exactly happens to those assets if you were to pass away?

Like many things in life, the answer to that question depends on several different things. That’s probably not the straight forward answer you were expecting, but we’re here to help break things down. In this article, we’ll cover 4 things that could potentially happen to your financial assets if you pass away.

Your assets could be distributed based on provincial laws

What happens to your assets after you pass away often depends on whether or not you have a legal will. Over 57% of Canadians don’t have a will, so dying without a will happens more often than you may think.

It’s a common misconception that if you die without a will, the government automatically gets all your assets. This is NOT true. However, it does mean that your assets will be distributed based on provincial legislation. 

When this happens, your assets may end up with the individuals you wouldn’t have chosen yourself. It could even exclude important loved ones. For example, common-law spouses are often not accounted for. The exact laws and procedures vary by province, but typically include very little flexibility.

The good news? There is a way to make these decisions yourself by making a will.

Your assets could be distributed to the loved ones of your choice

When making a will you get to make a plan for all your assets  – both of financial and sentimental value. The people you’ve chosen to pass on your assets to are called beneficiaries.

There are two ways you can gift your assets in your will – as a specific gift or as part of your residue. A specific gift or bequest is a specific piece of property or monetary amount gifted to a person. For example, gifting your car to your sister or $1000 to your niece would be considered a specific gift. Your residue is everything left after any debts have been paid and specific gifts have been distributed. You can divide your estate equally or unequally between whomever you want - spouse, children, and even charities. 

Creating a will is one of the best ways to protect your finances. Regardless of how much you believe your financial assets are worth, you should still make a will and designate beneficiaries so you have complete control over what happens to your belongings when you pass away. 

Some assets could be used to pay off your debt

We’re sorry to break it to you, but unfortunately your debt doesn’t disappear when you die. However, in Canada your beneficiaries cannot inherit your debt either!

When you die, your executor will take care of paying off your debts as part of the estate administration process. So if you have any debt when you pass away, any assets you own will be used to pay off your debt. Once your debt has been paid off, anything left over will be distributed as you’ve outlined in your will!

One common exception to this is a mortgage. A mortgage stays with the property, not the person. If you own the property on your own, your mortgage is paid by your estate when you pass away. If your home and mortgage are jointly owned, it is transferred to the surviving owner of the property.

Some assets could be lost forever

This sounds scary, but the truth is, in most scenarios your assets will be distributed to your loved ones in one way or another (although the process can potentially be time-consuming and complex.) However, this requires that your executor or estate administrator is able to access your assets. With the rise of cryptocurrency and digital assets, there is a real possibility that your assets could be lost. In fact, nearly half of Canadians (44%) don’t know what happens to crypto assets if they pass away and 10% did believe that they were lost forever. While, this is an unlikely scenario, if you do not share the password or private keys to your crypto assets - your family may never be able to access it.

This scenario can also take place if your loved ones and executor have no idea that you own an asset. This is why it’s important to be proactive and make an emergency plan for all your financial assets. Consider making a list of assets to share with your loved ones and using a password manager, like 1Password, to help share access info. There’s no need to list out all your assets in your will but including a list of key accounts can help guarantee that nothing is missed.

Your will is one of the best tools to protect your hard-earned financial assets in the event you pass away. Fortunately, a will that protects your finances doesn’t need to be a financial strain. You can easily make a will with online will platforms like Willful or by visiting an estate lawyer.

Thinking about your own death can be scary, but having an emergency estate plan in place is a key part of a healthy financial plan. 

Willful is a platform that makes it easy, affordable, and convenient to create a legal will online in less than 20 minutes, from the comfort of your home. Borrowell members can get 10% off any Willful plan by following this link and entering code BORROWELL¹⁰.