Estate Planning for Young Families


In addition to ordinary estate planning considerations, parents of young children should include provisions which minimize disruption and confusion and add stability for their children in the unlikely event that one or both parents pass away.

Guardianship of minor children

If one parent passes away, custody of children automatically passes to the surviving parent.  If both parents pass away, custody will be determined by a judge.

Parents may include a custody (commonly referred to as “guardianship”) clause in their wills setting out whom they wish to have custody in the event of a common disaster.  This clause has legal effect for 90 days but serves two very important purposes. 

Firstly it creates a “hands off” period and some certainty for the 90 days in the aftermath of a tragedy and prevents a "mad dash” to the court while emotions are running high.

Secondly, the guardianship clause sets out what the parents believe is in the best interests of their own children.  This can be quite persuasive to a judge (and also to others considering initiating or challenging court proceedings).

A judge will decide guardianship/custody on the basis of the best interests of the child. 

Age of Inheritance

Children under 18 year are not permitted to inherit money. Until then, if the parents do not have a will, the funds will be held by the government of Ontario. 

If parents have a proper will, the funds will be managed by the estate trustee who should be organized and honest and who will make sound financial decisions for the children.  Parents can ensure that the estate trustee will provide for the child’s needs and can also defer the final payment for many years after the age of majority to provide further protection. 

The age at which children will inherit money can depend on a wide variety of factors.


Annual RSP contributions result in a deduction from income.  In the year of death, the RSP (including growth) is taxed as income.  This can result in a significant tax liability.

This deferred tax liability can be avoided by “designating” the RSP to a spouse or dependent child or paid using insurance.

Designation means naming a beneficiary on the account.  In the event of death, the RSP can roll directly to the surviving spouses RSP tax-free.  It does not become part of the estate.  If children are the named beneficiaries, the RSP is converted to an annuity, which pays out to the child in equal installments until they turn 21.  The child is taxed annually on the annuity income.

Parents should establish testamentary trusts for their children and consider whether RSPs should be included in the trust.


The financial effect of the death of one or both parents can be extreme. The passing of a non-earning parent can increase costs of child care and increased parental responsibilities can negatively affect income.  If an income earning parent passes away, there can be an immediate and negative effect on lifestyle.  Each of these results varies between families. 

These financial repercussions of death can be mitigated through life insurance.  As discussed above, the death benefit can be paid to designated beneficiaries or to the estate.


Statistically it is highly unlikely that both parents would pass together.  However the purpose of estate planning is to provide for a stable transition in those unlikely eventualities.   The priority is to avoid making a bad situation even harder on the kids by not planning.

The kids will need stable caregivers who can step in immediately.  Guardianship should be determined in a stable and non-confrontational manner.  The children should receive bequests at suitable ages and be protected from the irresponsibility which can come from youth and bad decision-making. 

Finally, with adequate insurance, a family coping with extreme emotional trauma, can proceed without additional financial insecurity.


Prepared by Ismail Barmania of Barmania-Lawyers