by Neil Mathieson, CPA, FICB
According to a LAW-PRO survey recently conducted, more than 50% of Canadians do not have up to date wills, and far more serious, more than 67% have not prepared powers of attorney.
By not having a will, your family will not have the protection they need.
By dying “intestate”, which means without a will, the provincial government will step in and take control of your estate’s assets. Here are some of the implications:
- The assets will be distributed according to Provincial rules.
- Loss of income tax and probate planning opportunities.
- No opportunity to establish trusts or appoint guardians for your children or to make charitable bequests.
- Estate Administration will be more costly and less efficient.
- No control over who is chosen to administer the estate.
There are FIVE important steps that you can take to protect you and your family.
Step 1: Identify Assets and Liabilities
Review all your assets; stocks, bonds, mutual funds, bank accounts, retirement plans, such as RRSPs, RRIFs, pensions and annuities; personal property (jewelry, artwork and antiques); real estate; insurance policies and business interests. Most importantly consider your liabilities to calculate the net value of your estate. Also consider which assets are jointly owned.
Step 2: Decide How to Distribute Assets
It is important to decide to whom to leave your estate, whether it be family or charities. It is also important to plan for the possibility that beneficiaries will pass on before you do. It is essential to consider any contractual obligations and how they may affect the beneficiary.
Step 3: Determine the Best Plan for Transferring Wealth
A financial advisor will help you determine if assets should be transferred outright or by way of a trust. For example, a trust distribution under the will may be better:
- when there are minor children, grandchildren and/or beneficiaries with special needs.
- when there are assets to be preserved over generations, such as a family business or a cottage.
- when there is a charitable legacy.
- when providing for a blended family.
Step 4: Chose the Right Personal Representative.
You need to appoint an executor, trustee attorney and possibly a guardian for minor children. The executor administers the estate according to your will. The trustee manages trusts established during your lifetime and/or in the will. The attorney is responsible for managing your financial and/or personal care under the power of attorney.
Professional corporate trustees can be the best choice as an executor or trustee if you have no family living close by or if you own complex assets, such as a private company or own assets outside of the country. It is also a way to avoid potential personal liability for your family members or if you anticipate family conflict.
If you have minor children, then you also need to consider the appointment of a trustee for their immediate care that will be clear in the eyes of the law.
Step 5: Document the Plan
Before you meet with an estate planning professional, collect the following:
a list of your assets and liabilities.
- marriage or separation agreements.
- real estate documents.
- partnership/shareholder agreements.
- recent tax returns.
- current will and powers of attorney.
Finally, you should review your will and estate plan every three to five years, or when your personal or financial situation changes significantly.