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The secrets to smart estate planning.

A 2018 poll from the Angus Reid Institute found that half of Canadians (51%) say they have no will in place, while only one-third (35%) say they have one that is up to date. What this poll shows is that over half of Canadians will have no say in what happens to their assets when they die, and nearly one-in-six have wills, but haven’t kept them up to date.

How would you feel if you worked hard all your life and your beneficiaries didn’t get your assets as you intended? It seems many Canadians could be headed in this direction.

This unfortunate reality could play out for you and your heirs—but it doesn’t have to. All you need is some smart estate planning. Here’s what you should know about the process and why it’s important to tend to it now.

Know why you’re doing estate planning.

Estate planning is a tool outlining how your wealth will be distributed at your death, while minimizing the taxes and fees associated with settling your estate. Done correctly, you should be able to give more to your heirs than if you didn’t have a will.

Colleen Ciccozzi, Senior Manager of Wealth Programs for Coast Capital, explains why having an estate plan is important: “If you do not have a will,” she says, “how your estate is divided will be up to the provincial/territorial state legislation.”

Determine your goals for your estate plan.

When it comes to estate planning, your key goals should be to preserve as much of your asset base as possible while passing them on to your heirs in a simple, cost-effective manner.

This can be done by:

  • providing explicit instructions for your belongings and minor children.
  • putting key individuals in place to make decisions for you and your estate’s behalf.

Start with a letter to your loved ones.

Probably easier said than done, but begin with the end in mind. Envision how you want your legacy to survive through your heirs and assets—then plan accordingly. To help craft a vision for your estate plan, start by having conversations with your family members. Talk about your wishes, discuss their preferences, and formulate how these desires will be expressed through an estate plan.

Although the idea is to cover all your needs in your estate plan with your wealth, legal, and tax advisors, the execution of your plan may not be as successful as you’d like if your loved ones can’t find your information. To help with this, Coast Capital Wealth Management has created “The Letter of Instruction to My Loved Ones,” which consolidates the information your family may need at a stressful time. This tool is not intended to replace your financial planner, tax advisors, lawyers and other professionals, but to guide you in recording key information for your family.

Sections include helpful forms to fill out on you, your advisors, your documents, your assets, your insurance policies, and more. Completing this information and keeping it with your important documents will make handling your estate that much easier for those you care about.

Take an inventory of your assets (and related liabilities) like real estate, vehicles, collectibles, bank accounts, and other valuables. This list should also include how any surviving heirs and executor can access these assets.

If you have multiple online passwords for bank accounts and bill payments accounts, make sure those are accessible to the right people as well.

Coast Capital’s estate management tool also has places to hold all this information.

Focus on the key components of an estate plan.

Essential documents and tools of a successful estate plan can include the following:

  • WillContains instruction for representatives, your assets, minor children, final arrangements, etc.
  • Power of attorney: States your preferences for medical and personal care in case you become incapacitated.
  • Insurance policy: Can help your heirs pay for such things as probate fees, final expenses, and capital gains taxes, since they may not have immediate access to your estate.
  • Bank account beneficiaries: For registered accounts, this designation allows for bank account assets to go directly to the beneficiary without having to wait for your estate to be settled.
  • Trust: A legal entity where property or assets can be protected, invested, and set aside for specific people or causes; often helpful for high-net-worth families and business owners who want to protect family inheritances

Draft your will.

A key document in your estate plan is your will. It should address:

  • How your assets should be handled
  • Who should handle them
  • Who are your heirs and what they get from your estate
  • Guardians for children and/or disabled adults
  • Decision-making in your stead (upon death)
  • Charitable giving

Work with a team to help you create your estate plan.

You should work with an experienced financial professional that can help you with your estate planning. Coast Capital’s Ciccozzi says these individuals are key:

  • Financial planner:Helps you decide how to put the estate plan together.
  • Notary public:Has the ability to write a basic will and power of attorney.
  • Estate lawyer: Creates complex wills (including trusts), non-probate wills (available to incorporated business owners in BC and ON only), power of attorney (POA), and representation agreements.

Don’t forget to choose and name personal representatives, as well, who will make decisions on your behalf:

  • Executor: Facilitates the administration of your estate upon your passing.
  • Trustee: Handles trust assets, tax filings, and distributing assets, according to the terms of the trust.
  • Guardian: Individual(s) authorized to care for minor children and/or disabled adults in your household.
  • Power of attorney: A POA designates someone who can make decisions on your behalf in case of incapacitation. (There’s also an option to make this temporary to cover times when travelling out of the country.)
  • Health care power of attorney: This is the same as a POA, but is specific to health care.

You can choose the same person or a different person for each role and, if possible, choose alternatives in case your first choice is not available or decides not to execute their duties. Bear in mind that it can be a lot of work for anyone named into these roles, so be sure to confirm that they are comfortable and willing to act before adding them to your legal documents.

If you are unable to find someone, you can hire into the role. For instance, you could use a “professional” executor. You should consider professional support if your potential executors live outside of your province/territory, you know there may be potential conflict amongst family, or your estate is complex.

Understand the tax implications.

Taxes are always a consideration that need full attention to be sure your estate will be allocated in your best interest.

To address taxes, you should understand that when you pass away you are considered to have sold all of your assets at the fair market value on the date of death. This is referred to as a “deemed disposition.” Nothing is actually sold but all interest, dividends, capital gains from the deemed disposition of real estate, businesses, etc., deemed de-registration of RRSPs/RRIF accounts, and other forms of income earned to that point will be taxable to your estate.

An important exception to this rule is when you leave your estate to your spouse (including common-law spouses in BC and certain other provinces), in that case, the income tax owed will be deferred until they pass away—unless the surviving spouse sells an asset or withdraws funds from the registered accounts. At that point, a proportional amount of tax would be owed.

A financial planner can advise you on the best way to align your estate so that any special arrangements can be reflected in your will, ensuring your estate is transferred in the most cost-effective manner.

Move forward with confidence.

Creating an estate plan is a wonderful way to show your heirs that you care about their emotional and financial well-being, while passing down a financial legacy that could endure for many generations. The secret to success is to just treat this task like any other and take the time to do your homework in creating, updating, and finalizing your estate goals.

If you’d like to know more about creating an estate plan, connect with a Coast Capital advisor.

The stuff we have to say.
This article is provided for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, fees, and other investment factors are subject to change without notice, and Coast Capital Savings Federal Credit Union is not responsible for updating this information. All third-party sources are believed to be accurate and reliable as of the date of publication and Coast Capital Savings Federal Credit Union does not guarantee the accuracy or reliability of such sources. Readers should consult their own professional advisor for specific financial, investment, and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

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