How to Protect Your Assets With an Estate Plan

Do you think only the wealthy need to worry about estate planning?  Regardless of the size of your estate – which is everything you own – everyone should have a plan for distributing property according to your wishes.

And yet more than half of Canadians don’t have a signed will and 28% of those are between the ages of 53 and 71.  

What makes people avoid this essential planning step?  Is it the cost?  Law firms typically charge $500 to $1000 for a basic will.  Or you just don’t get around to it because it’s time consuming. 

Even if all you have is a house and bank accounts that are in joint names, it’s still important to have a plan.

One of the biggest mistakes is to believe that all will be taken care of by those who survive you.

Here’s what you need to do.

updating estate plan
Is your estate plan up to date?

Preparing your estate plan

Many people think if they have a will, their estate plan is complete, but there is more to it than that.  Estate planning involves caring for yourself and your loved ones, and how to effectively distribute your assets and property in an orderly manner. 

It includes:

  • Writing your will and naming someone to be responsible for carrying out your wishes.
  • Specifying who will handle your affairs if you become unable to manage them yourself and giving them direction through a power of attorney and medical directive.
  • Distributing your personal possessions and assets during your lifetime as well as upon your death.
  • Be cost effective by minimizing estate taxes and avoiding probate fees.

One planning misconception is thinking if you own all your assets jointly and have named beneficiaries on your registered accounts and life insurance that an estate plan is not necessary.  This might work at the death of the first spouse.  But what happens if you die together?

If you don’t document your estate plan, your province has default plans for you.

Related:  5 Important Consequences of Dying Intestate

Make your will clear

Having a will is one of the cornerstones of good financial management.  Spend some time assessing your situation before making an appointment with your lawyer.

Start with a list of all your assets and where they are held.  You need to know what you have and how much it is worth now.  Don’t forget pension benefits and insurance proceeds.  How are the titles held (e.g. joint with right of survivorship)?  Who are the beneficiaries of your registered accounts, insurance policies and other benefits?

List your liabilities, if any.  Calculate your net worth and the taxable value.

Once you understand the dollar value of all your assets, you can determine the estate planning and tax strategies you can use and get a sense of how to distribute them among your beneficiaries.

Use an Estate Organizer like this one to record all your financial information and professional contacts.

Who are your heirs?

Be specific.  List exact names and contact information of your beneficiaries in your estate plan, as well as their relationship to you. Identify gifts.  You may want to set aside money for education, or medical expenses or finance a child’s home or business.

List any other beneficiaries you want to leave something to. 

Leaving a part of an estate to charity is surprisingly uncommon.  This is a place you can truly make a difference, whether a non-profit or charitable organization or field of research. 

You can specify a dollar amount or percentage of your estate, leave a specific asset such as a work of art or stocks, or name them as a beneficiary to your insurance policy.  This can give you significant tax savings.  If this appeals to you, talk to someone at the organization of your choice for assistance.

Plan for some liquidity to make sure there is some cash readily available to pay for expenses such as funeral costs and appraisal fees.

Choose your executor carefully

The purpose of an executor is to carry out the wishes of the person who made the will.  The executor is responsible for paying all the debts of the estate (including taxes) and to distribute the estate to the beneficiaries according to the terms of the will.

If you choose your children or another relative make sure they are willing to make the commitment and have the time and skills to look after your affairs.  They should preferably live in the same town or city as you, or at least close by.

Settling an estate can take several months.  For these reasons, or for more complicated estates, a common solution is to appoint your lawyer or trust company jointly with a family member.

Related:  Should You Consider a Corporate Executor?

Power of attorney

Estate planning isn’t just for death; it’s for life too.  What if something happens to you – a car crash or a stroke for example – and you can’t make decisions for yourself anymore?

Although it’s grim to think about being incapacitated by illness or an accident, it does happen and it’s best to be prepared just in case.  Who will speak for you?  When you appoint a person with power of attorney, you trust that person to make decisions for you in case you’re unable to because of illness, accident or absence.

Many people believe that their spouse or adult children can automatically look after their money.  But without a signed power of attorney appointing them, a family member has no legal right to control your finances without obtaining court approval.

Make sure you give access

Give a copy of your will to your executor and discuss anything that may need clarification.

Organize your paperwork, online files and financial details. Have electronic storage or a fireproof safe where you keep all of your important information – passwords, codes, copies of your estate-planning documents, and so forth.  They need to be extremely secure yet available to the people you put in charge.

Include a list of your current doctors, their contact information and an updated list of medications you are taking, as well as copies of health care directive and durable power of attorney.  

Of course, tell your executor or a family member where you keep the documents.

Keep your estate plan current

Update your will and power of attorney whenever your personal situation changes – marriage, children, divorce, death, a move to another province or country, or if you want to change your beneficiaries or executor.

Also, significant changes in financial status can affect your previous decisions – receipt of a substantial sum of money such as a gift, inheritance or lottery win, sale of property or change in property value.

Revisit your beneficiary designations on investment plans such as RRSPs/RRIFs and TFSAs, and life insurance policies to ensure they don’t conflict with your will. Keeping them up to date is the easiest way to ensure a smooth transition of those assets.

To change a will, you can have your lawyer rewrite it.  If you want to revoke any old clauses or add new clauses to your will (minor changes), you can do so by adding an amendment, or codicil, rather than redoing the entire will.  A codicil must be executed and validated just like a will.

Hold a family meeting

According to TD Wealth Management, 39% of boomers have not even discussed their estate planning wishes with their children.

Talking about your will and your own passing can be uncomfortable, but communication is important.

Discuss the distribution of assets and explain the reasons for your decisions. You might discover that some of your bequests could unintentionally lead to conflicts between children. 

Some items may mean more to some family members than to others.  Something like the family cottage may not have the same sentimental value for your children as it does to you.

If any problems arise, you’ll have the opportunity to resolve them — and you’ll be thankful you uncovered the issues now.  

An estate that can’t be settled promptly can cause needless delays and legal problems for your heirs. With a little attention, you can avoid any problems and fighting among heirs (you think it won’t happen, but it does) and your assets will be distributed exactly as you want them to be.

The bottom line

Even though we don’t like to think about our own mortality, it’s important to have a proper estate plan in place even if you think you have very little to pass on.

Your will should be updated and filed with your financial plan.  If you don’t have one in place you should hire a lawyer who specializes in wills and estates to draw one up for you.  A few hours of a lawyer’s time could mean substantial savings in taxes and probate fees.

It makes sense to hire a professional rather than using an online document where you fill in the blanks.  A professional will ask you questions and bring up things you’ve never considered.

When it comes to estate planning, you are better off doing something now and amending it later than doing nothing at all.

Take a few steps now so that your possessions will be passed on to the people or organizations that you want to have them.  Protect what you’ve worked for from needless taxes and legal expenses so more of it goes to the people you intend it to.

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