Everyone needs an estate plan, but it’s something many people put off. Here’s the number one reason to cross this important task off your to-do list: a comprehensive, up-to-date estate plan takes care of your loved ones by ensuring that your legacy is transferred according to your wishes. In addition, it can save your estate and heirs taxes and may even prevent court battles over your assets. So, where should you begin?
Ensure that you have a will and it
A will communicates your intentions and alows you, and not the government, to determine how your assets will be distributed upon your death. If you don’t have a will or your will is determined to be invalid, you will be deemed to have died “intestate.”
Ultimately, the court will appoint someone to administer and distribute your estate according to the laws of the province in which you reside, regardless of what your wishes are.
It may be tempting to fill out a “do-it-yourself” will, but engaging an estate planning lawyer or notary can help you make sure you have considered all possible contingencies, essentially, that your will hasn’t left any legal loopholes that could lead to legal headaches for your heirs.
There are also many tax planning opportunities to available in estate planning.
After you’ve written your will, be sure to keep it up-to-date. Revisit it after important life events, including births, marriages, divorces, deaths, when you start, buy or sell a business, as you build or inherit wealth and when you retire.
It’s worth reading it over about once every five years to make sure it still reflects your intentions.
Also, discuss your will with your family. This helps to avoid surprises and can limit family conflicts in the future.
Choose the right people
Your will appoints an executor, who is responsible for a wide range of important duties including filing final tax returns, paying taxes, paying debts and distributing assets to beneficiaries or heirs. It can be a time-consuming job for a family member or close friend.
Some people appoint a professional executor through a financial institution.
Beneficiaries or heirs, who inherit your assets, may be named in your will or directly on certain accounts. For instance, you can choose a beneficiary of your Registered Retirement Savings Plans (RRSPs), it is important to consider the tax consequences.
As a simple example, it may make sense to leave your RRSP to your spouse, who can take advantage of a tax-free rollover into his or her own RRSP, and non-registered investment assets to other beneficiaries or heirs. Be sure to set up an enduring Power of Attorney and a Representation Agreement.
An enduring Power of Attorney covers your financial affairs and a Representation Agreement covers your personal decisions related to health care. The individual(s) you choose as your Attorney will have the legal right to act on your behalf. Choose people you trust, and have an in-depth conversation with them so you can be sure they completely understand your preferences.
Tie up loose ends
Here are a few other things to consider as you make important decisions about your estate:
• Consider arranging your funeral and paying your funeral expenses in advance to help your family avoid making stressful decisions during a time of emotional upheaval;
• Ensure that there will be enough liquid assets on hand to help family members cover any short-term or unforeseen costs
• Work with an accountant to estimate how much tax will be payable by your estate after your death;
• Outline in your will how you want these expenses to be covered;
If you do not need certain assets to fund your day-to-day expenses, consider giving them away before you die; done strategically, this can be a tax-saving strategy.
Evaluate whether you have sufficient insurance coverage; if you have extra income, think about additional estate planning insurance strategies.
BC charges a fee to probate a will, an administrative procedure whereby the court confirms the validity of the will and the authority of the executor, that is based on the value of your estate
An estate plan ensures your loved ones are taken care of and your legacy is transferred to your beneficiaries
or heirs as you would like. It can help you protect your beneficiaries or heirs, avoid probate fees or taxes,
unnecessary costs and other delays, and reduce taxes.
Please remember to always consult your investment advisor before taking any action.
Stuart Kirk is a Wealth Advisor with Precision Wealth Management Ltd and an Investment Funds Advisor with Manulife Securities Investment Services Inc. The opinions expressed are those of the author and may not necessarily reflect those of Precision Wealth Management Ltd or Manulife Securities Investment Services Inc. For comments or questions Stuart can be reached at email@example.com or 250-954-0247. Website www.precisionwealth.ca