Estate Planning: How Prepared Are You?
Just as any well-organized vacation requires thought, planning and attention to detail so too does an estate plan. At the time of your passing, you want to have confidence that your final wishes will be followed and your family is taken care of. Depending on your situation, you may have specific goals or tasks that you want to be accomplished after you pass, such as preserving family wealth, providing income for your spouse and children, funding education, the transfer of a cottage, or donations to charity.
Dying without a will cancels your ability to do any of the above. In the absence of a will, the provincial courts determine who will distribute your assets, who will be the guardians for your children, and what assets are sold. Also, there can be legal costs, delays, loss of control and provincial probate fees that have to come out of your estate. Having an up-to-date will drafted by a professional can ensure that your estate is handled properly and in your best interest. Your will covers many of these items so that your assets are divided amongst your named beneficiaries, any trusts for children and grandchildren are set up, and that you have some control over your estate.
If you pass away with any personal debt, including credit cards, mortgage, or car loans, your estate will need to pay them off first. Any assets will be used by the estate to pay off creditors, leaving less to be passed onto your beneficiaries. If your liquid assets, such as bank accounts and investments, are not enough to cover the debts, other assets such as jewellery, houses, cottages, or other items that form your estate may have to be sold. Life insurance can help protect your assets, by providing money to your estate to help pay off these debts; any remaining money in the estate can then be divided out to your beneficiaries as you wish.
In the year of your death, a final tax return must be filed that includes all income earned up to the time of death. Your investment accounts and capital property are deemed to have been sold on the date of death and all capital gains are included as income. There are some tax-deferring methods when naming a spouse on registered accounts, which allows the assets to roll over tax-free. The executor of your estate will also have to file for probate and pay probate taxes, which is based on the total value of the assets that flow through your estate. Having investments through a life insurance company can be passed onto the beneficiaries and not your estate and help reduce probate taxes.
Estate planning and wills can be quite simple and are not always expensive or complex. Every situation is unique and requires its own experts. Use the services of a lawyer and financial advisor to ensure that your wills and final wishes are taken into consideration. Make sure that your professional team, which may include an investment advisor, accountant, and a lawyer, clearly understand your objectives.