When you hear the words “estate plan,” do you think of a fancy mansion surrounded by acres of land? If so, you’re not alone.
However, that’s not what we mean when we talk about estate planning. In reality, everyone has an estate and planning what happens to it isn’t just for the wealthy.
Your estate is everything you own — your car, home, other real estate, chequing and savings accounts, investments, life insurance, furniture, personal possessions, even your digital assets like frequent flyer miles and social media accounts.
The basic goal of an estate plan is to ensure your affairs can be taken care of when you can’t do it for yourself — for example, if you become incapacitated or die.
It can also help you and your loved ones pay substantially less in taxes, fees and court costs.
Understandably, discussing death can be unsettling and even frightening for many people. But the turmoil caused by not planning can be much greater, especially for your family.
Everyone should have at least a basic plan in place, but it may need to have more pieces depending on your circumstances.
What an estate plan includes
There are many aspects of estate planning, but the most important document is your will. Your will does two things:
- It appoints an executor to administer your estate.
- It describes how your assets are to be distributed to your beneficiaries.
For some people’s circumstances, it may also include appointment of a guardian for minor children, or appointment of a trustee for a trust for those minor children or others.
Other elements of an estate plan may include:
- Enduring power of attorney for financial and legal decision making if incapacitated
- Representation agreement for personal and healthcare decision making if incapacitated
- Life and disability insurance to provide income to supporting your family or for paying debts and taxes on death
- Beneficiary designations on your RRSP, RRIF, TFSA and life insurance policies
- Knowing whether your assets are solely or jointly owned.
Basically, your plan should include all the documents and authorities that need to be in place if you become incapable of making decisions or managing your affairs for you and your dependents, as well as for attending to the wind up and distribution of your estate when you die.
How to get started
According to the Canadians and their Money: Key Findings from the 2019 Canadian Financial Capability Survey, only about half of Canadians (55%) have a will and 40% have powers of attorney completed.
Most people say they recognize the importance of having a plan, but the truth is many of us do not follow through.
Here are some of the most common reasons for not having an estate plan and our advice for overcoming them.
“My estate is simple.”
A lot of people think their estate is so simple that they don’t need a plan – for instance, if they don’t have a spouse, children or very much money. Even if your estate is small, you own something and have a financial presence that needs to be managed or wound up. Also, your situation may be simple while you are alive and capable but will become much more complicated if you lose your capacity or your life.
For example, without a legally appointed representative, such as an executor for your will or an attorney for your enduring power of attorney, no one can access your assets or your information for you. Not even your spouse or your children. The court can appoint a representative for you, but that takes time and can cost a lot of money. It makes much more sense to make those decisions for yourself while you can.
“It’s too expensive.”
It doesn’t have to be expensive to put your estate plan in place and it could end up costing a lot more in time and money if you don’t have one. Some ways you can save money include:
- Educating yourself: for example, you can find basic information and planning tools online through your financial institution or other websites.
- Seeking out information and advice: for example, talk to your family and friends to get their tips and recommendations.
- Making key decisions before you make your appointment with your lawyer: for example, make a list of all of your assets and how they are held, decide who your executor will be or who the guardian for your children will be, and who your chosen beneficiaries are and what they will be receiving from your estate so you can keep your appointment with the lawyer as short (and inexpensive) as possible. And once your draft will and power of attorney, is completed, get back to your lawyer on a timely basis to finalize the documents.
- Check for lower cost services as appropriate: for example, on-line will services, notaries, free legal services through University law students’ advice programs, or legal aid programs and clinics.
“I don’t have the knowledge.”
Remember that you don’t have to know everything and there is help available. Start by learning some basics and writing a list of questions to discuss with your financial planner/advisor at your financial institution. Free public seminars can also help you get started (keep an eye out for upcoming workshops and seminars at Vancity and at the Nidus Personal Planning Resource Centre). Once you’ve got some general information, you can meet with a specialist one on one to talk about your specific needs. For example, Vancity has an array of specialists available for advice and planning, including estate planners, who are available to help our members.
“I don’t have the time.”
We’re all busy these days, but what is given priority is what gets done. Think about what a gift it will be for your family to have your estate plan in place. If something happens to you, they won’t have to be mired in end-of-life details that could have been handled much more effectively by you earlier. To avoid unnecessary stress and upset, it would be wise of us all to plan well in advance for the end of our life and potential incapacity.
“I don’t know where to begin.”
It’s all about taking one step at a time. The most important things you need to decide are:
- Who do you trust to take care of your finances if you’re alive but incapable?
- Who can you rely on to take care of your minor children if you and your spouse both die?
- Upon your death, who can you rely on to properly take care of your estate, wind up your affairs and pass your wealth on to your beneficiaries or manage your children’s inheritance until they are adults?
- Who do you trust to make your personal and medical care decisions if you’re incapable of making them yourself?
- Upon your death, who do you want to benefit from your assets? Also, how and when?
- Will you have enough life insurance to support your family and pay your bills and taxes if you become incapacitated or disabled or if you die unexpectedly?
Once you have made these crucial decisions, with a helping hand from your trusted financial planners and advisors, you can easily put together the framework for a plan that your lawyer can flesh out and document for you.
As a member of Vancity, you have access to a whole array of specialists including financial and estate planners, wealth advisors, and wealth protection specialists to help get you on the right track. All you need to do is ask. You can reach us by phone at 778-231-2118, by email or through this online form.