Nobody wants to think about the “inevitable.” For some it may seem too far off, for others too overwhelming. The process of planning who will manage our wealth and assets when we’re no longer able to, may seem too time-consuming or expensive. Whatever the reason, it’s a task many Canadians put off until it’s too late.
A recent survey by TD Bank found that half of Canadians do not have a Will, an integral building block of any estate plan. The survey also found that 28% of those Canadians without a Will are between the ages of 53 and 71, and many of them have not even discussed estate planning wishes with their children.1
“Some people think estate planning only deals with allocating your assets after your death,” says Elise Pulver, Director, Wealth Planning at TD Wealth Family Office. “But estate planning or continuity planning creates a safety net for your loved-ones if something should happen to you. It can reduce conflict among family members during an already difficult time, and can also save you, or your estate, time and money.”
The good news is that if you start early, estate planning can become less anxiety-ridden and less onerous because you can tackle little bits at a time. Pulver believes that if you make it part of your to-do list when you are young, you make it less about dying, and more like any other life strategy, like mapping out retirement or your career. We asked her to help us build a checklist of things to consider when it comes to estate planning, no matter what age or stage you’re at.
Estate planning when you are young and single
- Consider insurance: There are good reasons to consider investing in life, critical illness and disability insurance early. For instance, there’s a good chance you may end up shopping for it later, but insurance will likely never be as cheap as it is when you are young and healthy. As well, the benefit allows your loved-ones to have a financial safety net should something happen to you.
- Prepare Powers of Attorney: A legal professional can help you prepare documents that assign decision-making powers for your health and property (like your bank accounts) if you are unable to make those decisions for yourself. Without it, someone would need to apply to the court to make those decisions on your behalf, which could be slow and costly.
- Consider drafting a Will: If a person who is not married passes away without a Will, provincial laws dictate how the estate is to be administered. That could mean your assets would pass to a parent or sibling. If you have other loved ones that you’d like to provide for, then having a Will states your wishes.
Estate planning when you are married without children
- Assess your insurance needs: You may wish to consider joint life insurance, critical illness insurance and disability insurance. This could provide income protection should one of you lose the ability to earn an income, through illness, injury or death.
- Check your beneficiaries: In the event that one of you passes on, an asset that is held jointly would transfer to the surviving spouse. For assets that are not held jointly (investments or insurance policies for example), ensure that you have designated a beneficiary.
- Review or prepare Powers of Attorney: A spouse is not automatically able to make health and property decisions on your behalf in the event one of you is incapacitated. It can be important to have those documents in place in case something happens to either one of you.
- Review or prepare your Will: In certain provinces, if a person who is married but has no children passes away without a Will, the surviving spouse will inherit the entire estate. If you wish for some of your assets to go elsewhere, it’s best to state your wishes.
Estate planning when you are married with minor children
- Consider converting life insurance: As we age, it can be increasingly common for health issues to pop-up. Now can be a time to consider converting your term life insurance policies to universal or whole life insurance policies that remain in place for the rest of your life. By converting your policy, you won’t have to undergo a medical exam. This may be preferable to purchasing a new policy where costs could rise if you have a health condition.
- Rework that Will, again: If a person with a family deceases without a Will, provincial laws dictate how their estate will be administered. In Ontario, for example, a surviving spouse will inherit the first $350,000 of the estate and the rest will be split in predetermined portions between the spouse and surviving children when they turn 18.2 If you have different ideas, it’s best to work with a professional to get that on paper.
- Assign a legal guardian: It’s important to declare in your Will who you want to care for your children should something happen to you. A Will can also direct the executors to maintain investments, such as a Registered Education Savings Plan for your children, and contribute to their education savings from the estate.
Estate planning when you are in retirement
- Plan for the transfer of specific assets: This can be an opportune time to discuss the transition of a family business or family heirloom assets, such as a cottage, antiques or art, with those who might inherit. Keep in mind that the transfer of certain assets could also result in income tax implications. It is also a chance to discuss your families wishes, and plan to manage income tax on death.
- Consider probate planning: In some provinces, the probate fees your estate must pay to the government can be as high as 1.5% of the value of the estate. Some things that can help plan for and reduce the amount of probate fees you will pay could involve establishing living trusts or the use of multiple Wills.
- For snowbirds: Consider how any U.S. vacation properties you own would be viewed by the IRS. It can be important to ensure that proper estate planning documents are put in place in any jurisdiction where you spend a significant amount of time, as requirements may differ there.
Estate planning can be complex, especially as you go through life, accumulate assets and circumstances change. According to Pulver, a good estate plan should be revisited and tweaked every few years.
“Sitting down at any age with an estate planning professional can help your wishes be carried out smoothly,” says Pulver, “and potentially make the process easier.”
DENISE O’CONNELL – MONEYTALK LIFE
ILLUSTRATION – MYRIAM WARES
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