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Estate Planning- A Primer

Estate Planning: A Primer


Estate Planning can be as easy as ONE, TWO, THREE - if you follow the right steps.


ONE: Recognize Estate Planning as a Process.


Like all financial planning, estate planning has several stages which include preparation, planning, implementation and review. Estate planning is often erroneously equated with having a Will. But without the preparation and planning stages, your Will may not 'fit' your personal circumstances. It's like buying a new set of clothes without trying them on!

Preparation stage: Gather information about your assets and beneficiaries, and analyze it.

What do you have to pass along to your heirs? The list will include personal property, real estate, investment accounts, insurance, and pension or retirement accounts and annuities. What is the current value? What is the legal ownership of property - is it joint with a right of survivorship or in the name of one spouse alone? What taxes will be payable by your estate, and when will these taxes be payable?

Planning stage: Consider your estate planning objectives, and the strategies to achieve them.

Consider your beneficiaries and how you want to provide for them. Also, if one of your beneficiaries dies before you, how do you want that person's share redistributed? Have you designated beneficiaries for insurance and registered plans? Does the property passing inside and outside your estate fit with your plan?

Are there cost saving or tax saving opportunities you should consider? For example, personal income taxes can increase more than $10,000 per annum for the surviving spouse. Do you want to consider spousal trusts to reduce this tax burden? Are trusts appropriate for other reasons? Do you need insurance or other solutions to pay taxes or provide for beneficiaries with special needs?
Choosing your executor is also an important decision. Ideally your executor should live in the same province as you, or at least be a Canadian resident. Don't assume appointing all your children is the obvious choice, especially if they don't always get along. The role of executor requires many skills. Your executor must be trustworthy and responsible, and must outlive you! If no family member or other individual is available, consider a trust company to ensure timely and professional administration of your estate.

Implementation stage: At this stage, a Will and Powers of Attorney, and any other legal documents are prepared and signed.

TWO: Use a Qualified Professional.

A lawyer who specializes in estate planning (and/or a notary in Quebec) is best suited to help plan and implement your estate plan. Home made Wills, Will kits, and other self-help solutions may save you dollars now, but may cause problems later on. Don't be 'pennywise and pound-foolish' - you have spent a lifetime building your wealth. Don't risk it all on a do-it-yourself, or inadequate estate plan. If all you need is a simple Will, the cost of professional help will not be that high. And if you need something more complex, the cost of even small errors now could be very significant - to say nothing of the emotional cost of fighting among family members if your intentions are not clearly spelled out in 'legally correct' language. Not every professional specializes in estate planning. The lawyer who did your house deal, or defended you in a fender bender may not be qualified to prepare your Will, particularly if your situation is complex or unique in any way.

THREE: Follow your Plan through to completion, and review it at least every five years.

While exotic travel or a family illness may make consideration of estate planning urgent, it is often put off. Many people die unexpectedly with a new or cost saving estate plan still 'on the drawing board.' Your beneficiaries are the ones who will ultimately pay the price. If you are 'stuck' at the planning stage, an estate planning expert may be able to assist you in resolving problems and moving on to completion. Remember an estate plan need not be perfect and can be changed later, as long as you are still alive and capable.

Ensuring your estate plan is up-to-date is also important. Many factors will dictate the need to update your estate plan. Marriage revokes a Will. Divorce also has consequences, so any change in marital status, even common law status, calls for a review. Also the passage of time creates changes. The law, your age, your wealth, and your circumstances may all have changed, bringing new planning opportunities and issues.

Now you have the ONE, TWO, THREE of estate planning. For further information contact your Investment Advisor, or seek the assistance of an estate planning professional.

The comments included in this publication are not intended to be a definitive analysis of tax applicability or trust and estates law. The comments contained herein are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances.