Estate Planning

What goes in an estate plan?
An estate plan ensures that your family and assets (or, your estate)are taken care of if you die, or that your care and finances are handled if you can't do so yourself.

Typically, an estate plan has at least three main elements, plus options depending on your needs: 

• A will: a document to indicate what you want to do with your assets and who gets what.
• Power of attorney: one for your financial assets/property and a separate one for medical/personal care, to detail who can make decisions for you if you are incapacitated.
• A living will: To complement the medical power of attorney, this document states your specific wishes if you cannot tell doctors yourself, including your preferences regarding life support.
• A trust: Some individuals with more complex estate needs may use a trust to put conditions on how and when assets will be distributed or to help reduce taxes or protect assets from creditors.
• Life insurance: A policy is not essential, but it could help a family handle a large tax bill or address other estate issues.

My will, my way

If it sounds too tedious to arrange the above details, think about the consequences of not planning your estate.

First and foremost, who will look after your dependents when you're gone? Who would be appointed as guardian of your kids or be responsible for others who depend on you?

Second, you could leave your loved ones in a mess. If no will exists, your estate could sit for months until a government-appointed trustee settles the matter, leaving family without funds for living expenses or resulting in added legal costs to resolve matters.

Third, your assets may not be distributed to your survivors in a way that you would approve. That's because each province must follow rigid 'intestacy rules' to allocate possessions to your nearest relatives. This usually means assets will be split among your surviving spouse and children, but the formula does not take into account your actual intentions. A common-law partner, un-adopted stepchildren or others could be left out. And, what if you intended to give valuable items or keepsakes to someone, but it isn't recorded anywhere?

Many people wrongly assume that their entire estate will pass directly to their current spouse, but that is often only the case for assets that are jointly held. Or, you may believe that past conversations with loved ones will provide clarity, but those undocumented wishes will not be reflected in legal decisions.

Death and taxes

Another reason to plan your estate is to address the inevitable issue of death and taxes, including estate and provincial probate taxes. When you die, the Income Tax Act will treat all non-registered assets as though they were sold at fair market value at the moment of death, creating a tax bill for your estate on the capital gains. Similarly, registered assets like RRSPs and RRIFs will be taxed as if they were cashed in, instantly reducing their value when the taxman takes his cut.

It's important to get estate planning advice about the best ways to minimize the tax impact, whether it's by leaving these assets to a spouse, creating joint accounts, setting up a trust or giving assets away before you die. Ultimately, estate planning is about protecting those you care about, and drawing upon those you trust to help you do so, including the expertise of a lawyer or accountant. By taking care of these uncomfortable but important issues, you'll know that everyone and everything that matters to you will be taken care of, your way.