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Estate Planning

How to Properly Plan Your Estate

May 28, 2006

This Planner’s Corner will try to take the stigma out of estate planning and provide suggestions on how to properly plan your estate.

Estate planning is not something most of us like to talk about. Issues that surround death and dying are seen as too unpleasant and heavy to deal with. Fortunately, as Christians, we have an assurance of the "glory that awaits". As Christians, we have a responsibility to plan for the care of our loved ones even after our death and consideration should be given to helping others by leaving a legacy - this can be done with an effective estate plan. Many of us have heard stories or been involved in situations where the dying individual did not have a proper will resulting in family squabbles and higher than anticipated expenses for legal and probate fees. A carefully considered and well-articulated estate plan can give your family some comfort and direction when they need it the most.

Some suggestions to plan your estate:

  • If you are married, you should ensure that your assets are joint. These assets might include: real estate, vehicles, bank accounts, term deposits, GICs and investment portfolios. If held jointly, these assets can generally be transferred, tax free, to the surviving spouse and would not be part of your estate.
  • If married, you should name your spouse as beneficiary on your TFSAs, RRSPs and RRIFs. Upon your death, these assets can be transferred, tax free, to the surviving spouse. You should check with your financial institution if you are not sure if you’ve named a beneficiary or would like to change your beneficiary.
  • You should consider naming a beneficiary on your life insurance policies as life insurance proceeds can be received tax free by your spouse, your family members and charities.
  • You should prepare a properly executed legal will. If you don’t want to risk your beneficiaries spending thousands in legal fees, pay now for some legal expertise. If no will is left - called "dying intestate" - provincial law dictates which of your heirs gets which assets. To avoid this, write a will that tells your beneficiaries:
    • Who you want to act on your behalf after your death (your personal representative formerly called an executor),
    • Your choice of guardian for minor children (very important)
    • Your intentions regarding income for your spouse and children.
    The will should also:
    • Specifically instruct the personal representative to pay off all debts, taxes and probate fees.
    • Identify who you want to have your jewelry, your car, the family heirlooms, etc.
    • Direct specific cash gifts.
    • Outline distribution of any property or funds remaining when all bequests have been made and all legacies paid.
    • Set out terms of any trust it creates. The deceased may have decided it is inappropriate to transfer the entire estate to the beneficiaries immediately after death. In such cases the assets could be held in the trust until the assets are eventually distributed. Trusts can be used as an effective tool if minor children or a financially dependent child or grandchild are involved, or for providing funds to a charity on an ongoing basis rather than a lump sum payment following death.
  • You should update your will as circumstances change. For example: a child reaches adulthood, a parent passes away, or a personal representative gets transferred to a different city.
  • For special situations such as a financially dependent child or a 2nd marriage, you should find an experienced estate lawyer who will provide you with sound advice and is familiar with setting up trusts.
  • If you own a business, you should seek advice from an accountant and estate lawyer to properly handle the transition in the event of your passing.
  • If your estate is complex or involves special circumstances, you should consider naming a trust company as co-representative of your estate. A trust company is an impartial, professional estate administrator. Concentra Trust, a member organization of the Credit Union family, can perform this service.
  • You can create or preserve an estate by using life insurance. Life insurance can be used to cover the tax liability of the estate or to pay outstanding liabilities. By leaving a life insurance policy to a charity, the charity will receive a lump sum donation at the time of your death. In addition, if a charity is named as beneficiary of a life insurance policy, the premiums are usually eligible for the donation tax credit.
  • You might consider giving to loved ones now. Children, grandchildren and charities may be able to benefit more from the gift now rather than later and you may be able to enjoy the gift with them. By doing this, you would avoid probate fees on the amount given away. The disadvantage is that as soon as the gift is made you lose control of the asset, so you should ensure that you have enough to provide for your living expenses. Large cash gifts to family members should be acknowledged in writing and the will should be updated.
  • You should consider an Enduring Power of Attorney and a Personal Directive in the event you become mentally incapacitated due to brain injury or diseases of the mind, to avoid significant cost and complexity of going through the process of a court appointed Trusteeship or Guardianship.

These suggestions are intended to get you started on the estate planning process. The proper estate plan will depend on each member’s specific circumstances. The services of a Certified Financial Planner, such as myself, a lawyer, an accountant and perhaps a qualified insurance professional may be required. The better an estate is planned, the less hassle it will be for the executor upon death.

Correction:It was mentioned that the will should identify the beneficiary of your jewelry, car, family heirlooms, etc. An astute member commented that this designation could be done outside the will depending on the circumstances. This he advised may avoid the hassle of having to place a dollar value on family heirlooms which may also reduce the time taken to settle the estate and make it easier to make changes. Mr. Dick Meindersma, an experienced estate lawyer, advised that within the will the personal representatives could be instructed to carry out the wishes of the deceased for items of a personal and sentimental nature of relatively insignificant value. These instructions for the benefit of the beneficiaries prepared outside the will should be in writing, signed and dated, and a copy stored in a safe place such as a Safety Deposit Box together with the will.

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