Simple Steps to Estate planning

An incomplete will or a careless legacy can hurt feelings and divide families. Here’s how to ensure that doesn’t happen to you:

On paper, an estate plan consists of four documents. The first is a will that details how your property will be divided. The next two documents are powers of attorney — one for property, one for personal care — that spell out who can make decisions for you if you’re incapacitated by illness. The final piece of paper is an insurance policy. This isn’t required, but it is a good idea if you’re leaving behind young children or a substantial tax bill.

What should unite all of these documents is an understanding of your family’s feelings. Experts can advise you on tax and legal matters, but no one knows your loved ones better than you do. A small amount of time spent communicating your intentions now can avoid leaving your kin with an eternity of questions. Just ask my family.

Organization

Your very first step toward an estate plan can be accomplished in an hour or even less. It requires nothing more than finding the documents that show what you own and what you owe. For starters, look for RRSP statements, pension plan forms and the title deeds to any property that you own. List any loans, mortgages or lines of credit you have outstanding as well as your credit cards. If people owe you money, note this, too. And, if possible, try to find documents that show what you originally paid for the stocks, bonds or other securities in your portfolio.

Talk to a Financial Advisor & Your Accountant

If you have any amount of wealth, it pays to spend an hour or two with an advisor and an accountant who specialize in estate planning. You might think that these professionals do nothing more than crunch numbers and calculate tax, sell insurance or set up RRSPs, but they are very good at giving advice about your options — options you may not even know you have — and often they take the lead in developing an estate plan.

One of the goals of any good estate plan is to minimize taxes. When you die, the tax man attempts to treat your registered assets — in other words, your RRSPs and your RRIFs — as though you had cashed them in and taken all the resulting money as income. You can avoid the tax damage on registered assets by leaving them to your husband or wife. You can also sidestep the tax hit by leaving these assets to a financially dependent minor child or grandchild, or to a financially dependent handicapped adult child. Otherwise, your estate has got to take the hit, and it can be a blow, erasing as much as 48% of the value of your registered assets.

See a Lawyer

By some estimates, fewer than half of adult Canadians have a will. This is shocking. If you die without a will, your property may languish in trust for months before your heirs can touch a penny of your money. Your wealth will ultimately be divvied up by the government according to a strict formula that apportions your possessions to your nearest relatives. Your wishes about who should get what, even if you expressed those desires frequently in past conversations, won’t matter.

In most cases, all that drawing up a will requires is an hour or so of your time and a couple of hundred dollars in lawyer’s fees. He or she can open your eyes to questions you may never have considered.

Update

No matter how thoroughly you plan your estate, situations change. Children are born, relatives die, marriages begin and end, property fluctuates in value. For all those reasons, you should dust off your will at least every three years and make sure it’s still up to date.

I have secured relationships with some very capable and trustworthy professionals who can assist you in these matters. Please call me if you are interested in seeking professional estate planning advice from and advisor, accountant or lawyer.

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