Why Every Freelancer Needs A Will (Regardless Of Earnings)
A will is often portrayed as a fancy document drafted by fancy lawyers for rich people to divvy up assets and provoke inheritance legal battles. This couldn’t be further from the typical truth. While there are rich people with ugly inheritance battles, the average will is used to cleanly and easily direct what happens with someone’s money after they pass. No one is exempt from this reality, especially not independent contractors or freelancers.
In this Q&A interview, Erin Bury, the CEO of digital wills company Willful, answers the common questions freelancers have about wills – and explains why every freelancer should make a will. (Note: This is not legal advice. Always be sure to check with competent legal counsel for your specific circumstances).
What’s the ‘threshold’ of when a will becomes a necessity versus a nice to have?
While there’s no threshold, I typically say that people should start thinking about a will when they have people who rely on them (pets, minor children, a spouse – whether common law or legal), or assets of value (sentimental or monetary) that they would want to pass on. If you’re 19 and living at home with your parents and you have $5 in your bank account, you may not prioritize getting a will. But typically in your mid-twenties is when you start accumulating assets or going through life milestones like marriage, kids, common law relationships, or getting a pet, and that’s when it’s key to get a will.
I should also remind folks about power of attorney documents – these are documents that appoint someone to make medical and financial decisions for you in the event that you’re incapacitated due to illness or injury. I know it’s not fun to think about, but as a freelancer, this is really important – we call it the “hit by the bus” factor at Willful. If we had to step away from the business, either temporarily or permanently, would other people be able to step in? Having power of attorney documents in place means that someone would be able to act on behalf of your business and personal finances if you were unable to.
Does a digital nomad freelancer need a will in every country they live in or just one in their country of citizenship?
Typically the place you reside at death dictates the jurisdiction of your estate – so if you live in Ontario, you would want a will that complies with Ontario law; and if you moved to Portugal, you would want to get a new will that complies with local laws.
There is a convention on international wills, which says that wills created in one country should be recognized in another, but not all countries have signed on – so it’s always best to check when you move. Another strategy can be to have multiple wills that cover assets in different countries – for example maybe you move to Portugal and have a will in Canada that covers your assets back home; and a will in Portugal that covers your assets there. For more on international wills, read more from law firm Hull & Hull (but knowing you’re likely reading from all over the world, it’s always best to check with a local resource, whether a lawyer or online will platform).
What information should be included in a will? Does it need to be notarized by a lawyer or can I write it on a napkin?
Great question – fun fact, holograph (handwritten) wills are absolutely legal in Canada and in many other countries – and in fact, there’s a famous case of a Saskatchewan man who wrote his will on a McDonald’s napkin and it was held up in court! Not what I’m usually thinking of while eating my Big Mac, but hey.
A will is a simple legal document that contains:
- Appointment of your executor and any backups in case they’re unable or unwilling to act in that role
- Appointment of guardians for minor children and/or pets, and any backups in case they’re unable or unwilling to act in that role
- Appointment of beneficiaries. These take two forms:
- Bequests – specific items or amounts of money that will go directly to a person or charity
- Residue – this is everything that’s left after debts, taxes, and estate expenses have been paid, and bequests have been distributed. This is split up by percentage (for example 50% to my spouse, 50% to my child)
- Appointment of backup beneficiaries – unfortunately people let their wills gather dust, vs. keeping them up to date, so it’s common for people named in the will to predecease (pass away before or at the same time as) you – that’s why it’s important to outline what should happen to a beneficiary’s share in that event
A will can sometimes include funeral/burial wishes, or any additional instructions that the will-maker wants to be explicitly included in the legally-binding document (for example maybe you want to explicitly state that you are disinheriting your brother because you had a falling out 20 years ago).
It typically does not include a detailed listing of assets, since those change often, and the will can become public domain when it goes through the probate process after you pass away. Instead, it’s recommended to compile helpful ancillary information for your executor. This could include a key contact list of beneficiaries; a list of your assets; additional funeral/burial instructions; etc. I actually have a “When I Die” folder in Google Drive that contains a lot of this info, in addition to things like final social media posts I would want posted after I pass away. Here’s a great guide to creating a similar folder.
Can I leave instructions for clients in my will, like login information for the platforms I used to produce work for them?
Great question – to my knowledge, this is typically not contained in the will itself, although technically you can put whatever you’d like in your will (although a platform like Willful can’t accommodate that type of customization, and adding more instructions with a lawyer means more hourly fees – and, I would imagine this would change often as your client list changes).
Rather, these are the type of instructions that could be contained in any business succession planning documents and shared with an executor (for example a Google Doc with instructions that you share with your executor). Since your executor is representing your business interests after you pass, sharing instructions with them on how to access accounts, or compiling key client lists and any instructions for how to access work, would be immensely helpful.
Is it worth getting a will even if my freelance earnings aren’t that high?
I often hear people say “I’m not rich, so why do I need a will?” Here are a few reasons why you should have a will, even if you’re not Warren Buffett yet:
- You may not have large assets yet, but your assets will grow over time. Having a will in place now means that you’re covered in the future, vs. putting it off and risking passing away intestate (without a will)
- Even if your assets aren’t big, they’re something! If you pass away without a will, a government formula outlines how they would be distributed, and it likely wouldn’t match what you would want. Whether you have a net worth of $25,000 or $1M, having a
- A will isn’t just about monetary assets – for example in my will, I’ve gifted my wardrobe and jewelry to my sister, and passed on a few meaningful paintings to a relative. You likely have personal belongings of value, or maybe even heirlooms, and a will can ensure they go to the people you would want them to
- A will isn’t just about asset distribution – as mentioned in the previous answer, it also allows you to appoint executors, and guardians for children or pets – if you don’t have a will, the court will appoint those people for you, and it will slow down the process of estate administration
- Reducing the burden on your family – when someone passes away without a will it adds a lot of stress to families at a time when they’re already grieving. Without a will, there are lots of unanswered questions; it takes much longer; and it means applying to the court to act in roles like your executor. Having a will is just a good thing to do for your family, even if you don’t think you need one
Is a will valuable even if someone already sets up beneficiaries for their accounts?
The short answer is yes, absolutely. You may have what are called “will alternatives” – joint investments, properties or bank accounts that would transfer to a spouse upon your death; registered savings accounts or pensions with beneficiaries named directly on the account; or a life insurance with a named beneficiary – but you likely also have other assets that would be covered under your will, whether that’s your bank account account, personal possessions like jewelry or art, or digital assets.
Also a will isn’t just about who gets your assets – it also allows you to appoint an executor to wrap up your estate; to assign guardians for minor children or pets; to leave any heirlooms or specific bequests; and to outline funeral and burial wishes (although they’re not a legally-binding aspect of a will, they’re often included since folks don’t discuss it with family). So having a will in addition to appointing account or policy-level beneficiaries is important.
Do you need separate wills for you personally and your business?
Your will covers your personal and business interests (for example if I owned stock in a company, or I owned shares in my own company, those would be treated as assets under my will).
Typically a will contains a carry on business clause, which means if you passed away your executor would be able to wind down your freelance business. You can outline specific instructions for what you would like to happen to the business in your will (for example you want it to be wound down vs. sold), or you can provide separate instructions to your executor. If you are incorporated and have a shareholders agreement, it may also outline what happens upon the death of a shareholder (same with if you have any stock options – the option plan will typically what happens to those options upon death).
Freelancers can create what’s called a dual will, which separates your business interests for tax purposes. For example in Ontario, most estates have to go through probate, which is the court process of formally accepting a will. Probate fees in Ontario are equal to about 1.5% of your estate – so let’s say you have a business that has $1M in the bank, by creating a dual will to separate those assets, they would not go through probate and would not be subject to those fees, saving your estate $15,000. But this is not necessary; and unless you expect your business to have quite a lot in the bank when you pass away, it may be extra effort you don’t want to undertake.
The great thing is that you can always evolve and improve your estate plan over time!