Real estate is not often specifically dealt with in a Will, and therefore frequently forms part of the residue of an estate. The residue of an estate is the amalgamation of all assets left over after paying any debts and gifts, which is then generally reduced to cash and distributed.

However, there are other options available for dealing with real estate in a Will worth considering. One such option is to make a specific gift of real estate, which is appropriate where a Will-maker wants their property to go to a specific beneficiary, rather than fall into the residue of the estate to be shared with other beneficiaries.

When making a gift of real estate in a Will, there are a few key questions to ask:

  1. Who will pay the mortgage? Will the beneficiary inherit real estate free and clear of any financial encumbrances or subject to financial encumbrances? By default, beneficiaries of specific gifts of real estate are to take on the portion of debt attributable to the acquisition, improvement, or preservation of the property. To avoid the complicated exercise of determining which debts a beneficiary must assume, simply specify in the Will whether property passes with clear title or subject to encumbrances; keeping in mind that the residue of the estate will be responsible for paying any financial encumbrances if clear title is intended.
  2. What happens if the property has been sold? If property that is specifically gifted in a Will is disposed of during the life of the Will-maker by a representative or attorney of the Will-maker (and thus no longer available for the beneficiary), does the beneficiary receive nothing, or some value in exchange for the gift? By default, the beneficiary would be entitled to an amount equal to the proceeds of the real estate sold. Therefore, it is necessary to clearly specify in the Will whether or not beneficiaries will receive value for property disposed of, and if so, how that value will be determined.
  3. What if there is not enough money to go around? In situations where the estate is not large enough to pay all debts and satisfy all gifts, the estate’s assets will be reduced to pay debts. The law provides a specific order that assets are to be sold to satisfy debts; importantly, assets in the residue of an estate will be used to pay debts and creditors before specific gifts of property. If you wish to prioritize gifts or gifts to certain groups of beneficiaries (e.g. gifts to grandchildren prioritized over friends or charities), it is necessary to specify those instructions in your Will.

Discuss this and other options to address real estate in your Will with a lawyer. As they say, an ounce of prevention is worth a pound of cure, and in the case of estate planning it is worth a ton.

Courtney Glendinning, Lawyer
Wills and Estate Planning
Sorensen Smith LLP