24 January 2022
Estate Planning Essentials
Let’s face it, making an estate plan is probably not the activity on the top of your to-do list. Most Canadians do not have a valid will. However, having an estate plan is one of the most important things you can do for the people you care about.
If you are new to the concept of estate planning, it might seem overwhelming. With this article, we will help you understand some of the basics, so that you can feel comfortable considering the first steps in setting out your own Plan.
An “Estate Plan” is a collection of legal documents that set out how you want your assets to be distributed after you pass away, and who you would want to manage that distribution.
A good estate plan can also set out how you want to arrange for your own needs as you age. Consider how you would want your property and finances to be managed, and how you would want important healthcare decisions to be made, should you require help or become unable to make such decisions for yourself during your lifetime.
By no means exhaustive, here is a brief introduction to the basic documents that you might consider as part of your estate plan:
- Your Will
Your will is often the cornerstone of your plan. It names your executor, or personal representative. Your Executor is the person that you nominate to gather, safeguard, and distribute your assets after you are gone. Your will can also name a guardian for your minor children, and alternate executors or guardians in the event your primary executor or guardian is unable or unwilling to complete their duties.Your will can give specific authority, or powers, to your executors, such as the ability to access and manage your digital assets and liabilities after you are gone– an absolute must, in present times. (Just think of all your passwords!)Above all, your will provides clear instructions for the distribution of your assets among your beneficiaries. Your will can name individual beneficiaries (“my spouse, Jane”), or groups of beneficiaries to be treated equally (“my children”, or “my grandchildren”). Your will can direct specific assets to specific beneficiaries, such as a prized heirloom to a best friend, or, it can assign portions of the residue of your estate to individuals or groups. (Residue, is the amount that remains in your estate after all debts, taxes and specific gifts have been fulfilled).Your will can also set out gifts to charity, trusts for your pets, and funeral wishes. Without a will, there is no way for you to make these directions known, after you pass away. A will is essential if any of the beneficiaries you are considering has mental disabilities.
- Your Will
In the most basic sense, a Trust is legal relationship that describes assets that are held by one person (a “Trustee”) for the benefit of another person (the “Beneficiary”). Trusts can be used to protect assets from creditors, to assign or manage the control or distribution of assets, and for tax planning or probate purposes. An estate plan can include two types of trusts: Testamentary Trusts; and Inter-Vivos Trusts (or “Lifetime” Trusts).
Stay tuned for the next article explaining what are two different major type of Trusts that can be setup to support Estate Planning.
Meanwhile, if you have questions about Estate Planning, please reach out to our Wills & Estates team and they will be able to give you more information on your circumstances.
Joe Fingerote is an Associate in the Business Law Group at Watson Goepel LLP.