Not many people like to think about death, and certainly not our own disability or demise. As unappealing as it might be to start planning for this inevitability, it has to be done.
The Legal Stuff
First, get the legal stuff done. There are many documents you may need to consider, and the good news is that it is likely not as complicated or expensive as you might imagine.
A Will
Everybody needs a will; however studies show less than half of Canadians actually have a will. A will is there to explain what you want done with your assets when you die, and ensures that your family is taken care of. It might also determine who will take care of your children; a decision you likely do not want to leave in the hands of someone else.
Get it done: In most cases, putting a will together only takes a few hours. The cost for will preparation is several hundred dollars, but without one, the legal costs to settle your estate could easily eat up thousands and even tens of thousands of dollars. More complicated and larger estates will cost more to plan, but the more money you have, the more you—and your heirs—have to lose. This is something that’s worth getting right. And on that note, ensure you are hiring a lawyer who comes recommended and is competent at writing a good will. As with any profession, there are good ones and not so good ones.
Power of Attorney
A Power of Attorney (POA) is a legal document that gives someone else the right to act on your behalf. There are two types of POAs:
- 1. You can name someone to make financial decisions for you, such as paying your bills, with a POA for Property (commonly known as a Financial POA).
- 2. For personal care and health decisions such as where you live, what you eat or what medical care you will receive if you get sick or injured, you can name someone in a POA for Personal Care.
You can name the same person (or people) for either POAs, or different people.
Get it done: You never know when you can be physically or mentally incapacitated, so having a trusted person legally appointed to make medical and financial decisions is an important step to your estate plan. These documents can also be drafted at the same time as your will, many times for a combined fee.
An important note on these legal documents – be sure to communicate your wishes clearly to both the executor(s) in your will and your Powers of Attorney. They need to know what your wishes are so that they are not left wondering what to do in a given circumstance. Being an executor is a big job, not a privilege, so choose someone who is competent to do this work.
Life insurance
As we’ve mentioned in past blog posts, life insurance is a key part of financial planning, especially for those with family and dependents, and for people with a large amount of assets. You want to protect what you have built, and keep as much as possible out of the hands of the Canada Revenue Agency. You want to ensure there is enough for your family and dependents if you were to die prematurely. The first step is to get an estimate of what your estate taxes might be and what your family would need if you were no longer there to help support them.
A lot of people dislike life insurance, and refuse to pay for it, or simply assume they can’t afford it. Unfortunately, we have seen first-hand what not having proper insurance in place can do to a young widow or widower and their family, or how estate tax can significantly reduce the amount your heirs will receive.
Get it done: Again, life insurance may not be as expensive as you might think, and Kay and I can survey companies all across Canada to get you the best rate and a policy tailored to your specific need. Don’t wait for later to get this part done; you never know when you might fall ill and be ineligible for insurance, or worse—die suddenly with none at all.
The Other Stuff
Ensure that any assets that allow for a named beneficiary have one, and that these are kept up to date if your personal circumstances change. This includes RRSPs, RRIFs, TFSAs, work pensions and life insurance. These assets can then pass directly to your heirs, without going through the will, saving on probate fees. A word of caution though; if you have debts at death you need to have enough in your estate to pay those first. Professional advice during estate planning is essential to ensure your wishes will actually be accomplished.
If you have all the recommended legal documents in place and they are up to date, you are certainly well prepared. There are however, a lot of other things that your family member might not be able to figure out without you. We recommend creating a spreadsheet of everything your family might need access to, along with instructions on how to do it. Give a copy to the executor of your estate, and keep one in a safe place yourself. Be sure to keep it up to date, and give revised copies to those who need it. You would be shocked to find out how many bank accounts go untouched with tens, sometimes hundreds of thousands of dollars after someone’s death because heirs do not know that they even exist.
We have a list of items that should be included in your estate inventory document available to our clients. If you would like a copy, email us and we will see that you get one.
So, if this blog post has struck up some anxiety, start by having a conversation with your partner or family members. Then begin organizing and documenting your financial life. You’ll feel much lighter and more prepared without the huge burden of being unprepared.
We help our clients get their estate plans in order, by facilitating family meetings, referring and working with professionals such as a trusted lawyer, and getting your life insurance needs covered.