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Three essentials for estate planning

06 September 2018 by National Bank
estate planning

Preparing your estate plan can help save your loved ones a lot of trouble. Do you want to begin organizing your estate but you don’t know where to start? Here are three essential elements of estate planning.

Have a will

Generally, it takes less time to settle an estate when you have a will, plus, there are fewer administrative steps to go through. However, before writing a will, you should consider a few things. Your last wishes, your familial situation, your assets to be divided and your choice of an executor (or liquidator in Quebec) should be at the top of the list.

It’s estimated that less than half of Canadians have a will. “People only consider their will after a death or when settling the estate of a loved one,” says Chantal Lamothe, a Financial Planning Expert at National Bank. According to her, people often don’t have a will because they can’t agree on important points such as the choice of a guardian for their children.

A will is the best estate-planning tool to ensure that your last wishes are respected. By writing a will, you can name the executor of your choice—someone who you trust, who will be able to settle your estate—and you can decide how your money and property will be divided. You can take care of your loved ones or support charitable organizations by leaving them property or money they may not be entitled to if you die without a will.

“In the absence of a will, the law dictates how your property is shared,” explains Ms. Lamothe. “In Quebec, a third of your assets go to your surviving spouse and two-thirds go to your children.” However, in the case of common-law partnerships, this rule does not apply—they are not recognized by law. “A common-law partner will not inherit anything,” says Ms. Lamothe.

In Ontario, the situation is similar. Spouses inherit the first $200,000 of your estate and anything left over is divided between them and your children. And for common-law partners? It’s the same as Quebec: unless you have children together, they are not entitled to receive anything from your estate.

Having a will allows you to choose how your children and grandchildren receive their inheritance. “You could request that an amount is deposited when they turn 18 and another amount at age 25, for example. You can even give explicit directions about how the money can be used, such as for their education,” says Ms. Lamothe.

If you have children who are minors, you can name a legal guardian to ensure they’re cared for in the event you die, or if you and your spouse die at the same time. A concise will also prevents your spouse or children’s guardian from having to validate their actions with the Public Curator in Quebec or the Office of the Public Guardian and Trustee in Ontario. Among many other services, these public organizations are responsible for ensuring the protection of minor children’s inheritances in the absence of a will.

Consult with professionals

“A do-it-yourself will is better than no will at all,” says Ms. Lamothe. However, it is difficult to predict future needs, “especially when there are things we aren’t even aware belong in a will.” Are you a business owner? Are there shareholder agreements? Is your heir capable of running the business? Have you appointed replacements for your heirs? If you leave your cottage to your common-law partner in a blended family, would you perhaps like to make it clear that the cottage will go to your children after your partner’s death, rather than his or her own? A notary specializing in estate law can help guide you when setting these terms in your will.

An expert can also help you consider your options in case of incapacity. Have you considered a protection mandate? A power of attorney? These decisions are an integral part of estate planning and will be useful during your lifetime.

While reflecting on your estate, you should also make an appointment with a financial planner. You will be able to review your assets and debts, and discuss strategies to minimize the tax burden and maximize the liquid assets available for your loved ones. Perhaps you would like to open a trust fund for your children or grandchildren. You can discuss these options with your financial planner.

A conversation with your financial planner will prepare you for your meeting with a notary. It can help you avoid additional costs if you already have a good idea of your financial situation and know your wishes when it comes to planning your estate. Since your wealth includes your properties and investments, among other things, you should consider asking questions about your RRSP and RESP. For example, if you have a common-law partner—considered one after a year of living together in Quebec or three years in Ontario—the tax rollover rule for your RRSPs can apply and defer the tax payable. Your RESP, however, will be left to your heirs unless stated otherwise. If you want your grandson, for instance, to be the beneficiary of your RESP, you must specify this in your will.

Revise your will

Life does not move in a straight line. Many things can happen between the time you prepare your will and your death. “Generally, pivotal events cause people to review their will,” says Ms. Lamothe. Whether your familial situation changes, you purchase or sell a property or because new tax measures have been implemented, it’s always a good idea to revise your will to ensure that your final wishes are up to date and in writing.

You should also think about the executors designated in your will. Are they still alive? Are they able to manage your estate? Have they moved abroad? Do they have the time? If, for example, you’ve named your daughter as executor and she’s a doctor now living in Vancouver: “She may not have time to manage your estate,” explains Ms. Lamothe.

Finally, when revising your will, you should also take time to review the beneficiaries of your life insurance. Here again, many things can change over time.

“Estate planning is about helping your loved ones when you are no longer here. They will be the ones to manage your estate. Give them the gift of planning this essential step in advance,” concludes Ms. Lamothe.

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