The wonderful world of Estate Planning
Put directly, Estate Planning (EP) encompasses a wide range of topics and services from examining taxes that would apply on our death, options for tax deferment, income requirements for survivors and bequests to our chosen heirs and beneficiaries including charities, as desired. It is also about ensuring that our Wills are up-to-date and other documents such as Enduring and General Powers of Attorney together with Living Wills (sometimes called Healthcare Declarations or Representation Agreements) are all properly prepared.
Whether it seems like it or not, EP applies to everyone once they reach the legal age of majority in their province or territory of residence. Unfortunately, many people make a choice – conscious or not – to do nothing. Such a choice can be made as a result of ignorance or simple lack of awareness of the need and consequences of inaction. Another very common reason for not getting things in order is a fear of confronting their own mortality – and this is by no means restricted to young people – the Generation X and Y folks – it applies equally to a great many Boomers and Zoomers!
I agree it isn't a "normal" topic of conversation in the casual sense, but I learned something many years ago – we all pass away – the only variable is WHEN. For most of us, we also have to face the reality that at some point, we may not be able to act on our own behalf due to illness or accident or may no longer be able to care for ourselves – so plans are necessary. Evaluating your needs and making plans is the process of EP. Similarly with Financial Planning, EP is a process that requires re-visiting and reviewing on a regular basis as our own circumstances change. So let's examine some of the more common issues and how they can affect each of us.
We have all heard the expression – the only certainties in life are death and taxes – unfortunately, it is completely true! One of the key principles of EP is to consider the financial impact of our death and the taxes that will result – and yes, taxes WILL apply on our death for virtually all of us – the more we have when we "pass", the higher will be the ultimate tax bill – sorry! In certain circumstances, if we are in a committed relationship (as defined in the Income Tax Act – ITA), taxes can deferred until the second person passes away – but they have to be paid eventually. Deferral is not avoidance.
If something happens to us "unexpectedly" (no-one ever plans for a specific date of course!), then we need to consider ensuring that our surviving family can maintain their lifestyle without debts and a reasonable continuing lifestyle. If we have accumulated enough net assets, then this accumulated value can take care of our family and heirs. If not, then insurance products came into play. If we have some special people or charities we wish to support after our passing, this needs to be included in the number-crunching.
There are "living risks" that we face as well – a severe illness or crippling accident can throw a very large wrench into our future plans. But there are methods we can use to help deal with these issues as they arise – everything from unique products such as disability income insurance and critical illness or long-term care insurance to Enduring and General Powers of Attorney and Living Wills/Healthcare Declarations.
Living Wills are particularly important as this document gives you the opportunity to dictate the type of healthcare you are prepared to accept should be unable to act on your own behalf. This includes everything from treatments you will accept to your wishes in the event of a terminal situation – passing with dignity.
The insurance products help create the cash-flow to meet the financial requirements we may face and the legal documentation ensures that there are substitute decision makers in place should we require them to act on our behalf.
Finally we come to our Will. The GOOD news is that if we chose not to prepare one for ourselves, our far-seeing Provincial and Territorial Governments give us one for FREE!!!! Inheritance matters are not a Federal responsibility under our Constitution – each Province or Territory makes their OWN rules – and you probably won't like them. Remember, you only get what you pay for – if it is free, be VERY concerned – and a free government Will is no exception.
Your Will is your opportunity to make decisions about your estate – not only who gets what but when and how they receive it, do they own it after you pass or just get to use it until they pass away and then it goes to someone else? If you have minor dependents, who will be their guardians if you both pass away? Do you want your heirs fighting over your possessions (Maybe you do!)??
EP is a team effort – you need a well-trained and educated financial advisor and a legal advisor who specialises in estate and family law.
To look for a legal specialist, you can contact your Provincial or Territorial Bar Association via their website to get the names and contact information for lawyers who have Estate and Family law as their preferred areas of practice.
For an EP advisor, look for people who hold either (or both) the CLU designation – Chartered Life Underwriter – as specialist in EP or a CHS – Certified Health Insurance Specialist – both of which are both administered and accredited through ADVOCIS – The Financial Advisors Association of Canada who are the governing body responsible for these world-wide designations in Canada. Another designation of interest to consumers is the relatively new (to Canada) TEP – Trust and Estate Practitioner – granted and administered by the Society of Trust and Estate Practitioners – Canada.
EP is potentially a complex process – make sure you find qualified advisors to help you and your family!
To arrange a free consultation call MONEY® at (905) 475-0000.