Estate Planning: Wills and Probate
While a will is a far more complicated document than a note, leaving a will for your family is not only a considerate move on your part; it may prevent your family from dealing with several hurdles and complications after your passing. It’s a good idea to think carefully about making a plan for you and your estate when you die.
You have an estate.
It doesn’t matter how limited (or unlimited) your means may be, and it doesn’t matter if you own a mansion or a motorhome. Whether you’re considered wealthy or of modest means, when you die, you leave behind an estate. For some, this can mean real property, cash, an investment portfolio, or other investments. For others, it could be more straightforward. Either way, what you leave behind when you die is your estate.
But I don’t need estate planning—do I?
If your estate is small, should you still have an estate plan? If you’re just leaving behind cash, who will inherit it? Do you have a spouse or children? Is it theirs? Should it go to just one of them or be split between them? If you don’t decide, you could potentially leave behind a legacy of legal headaches for your survivors. Estate planning is about determining how what you have now (money and assets) will be distributed after your death.
Creating an estate plan may give you the comfort of knowing that your wishes will be carried out when the time comes. Your estate plan could include wills and trusts, life insurance, disability insurance, a living will, a pre-or post-nuptial agreement, long-term care insurance, power of attorney, and any other assets you own.
Is having a will enough?
While your will states who your beneficiaries are, those beneficiaries may still have to seek a court order to have assets transferred from your name to theirs. In such a case, those assets won’t lawfully belong to them until the court procedure (known as probate) concludes. Estate planning can include properly prepared and funded trusts, which may help your heirs avoid probate.
Incidentally, having a named beneficiary designation of registered assets like TFSA's, RRSP's, or in and life insurance policies may bypass the estate, and not be made in wills or trusts. If the deceased did not properly review the beneficiary designations on their registered accounts and insurance policies, the estate planning consequences of this inattention can be severe. For example, a person can leave their TFSA assets to a grandchild in a will, but if an ex-spouse was listed as the primary beneficiary of that TFSA, the TFSA assets bypass probate and would go to the spouse since they are the named beneficiary.
Where do you begin?
It helps to speak with a qualified legal or financial professional with experience in estate planning. A qualified financial professional may be able to refer you to a good estate planning attorney and a qualified tax professional. Once you have all these members on your team, they can work together to assist you in drafting your legal documents.
Can I create my own estate plan?
Maybe you have seen those will-in-a-box kits. Perhaps you have even considered picking one up. While you can draft a will on your own, there are reasons why this is not a one size fits all approach. Some people do it themselves thinking they are saving money, but they overlook or are unaware of some important details, the cost of which could easily outweigh any savings.
Wills, trusts, and estate plans should be crafted with the help of attorneys. Fortunately, many financial professionals have relationships with attorneys. Instead of searching the Internet or the Yellow Pages for a stranger, ask your financial adviser for a referral.
What happens without a will?
Every day, people die intestate. In legalese, this means without a will. This opens the door for the courts to decide what happens with their estates.
When no valid will exists, provincial laws dictate how assets are distributed. While these laws may aim to divide an estate evenly (or equitably) among heirs, it is often not fair. Simple, right? Unfortunately, the way assets transfer does not often correspond to the wishes of the deceased person.
Articulate your plans for the estate and your family.
Most people have specific ideas about who should inherit what from their estates. Anyone who cares about the destiny of his or her wealth should take this basic estate planning step. When an individual dies intestate, the future of his or her estate is largely up to the courts. A basic, valid will stating your wishes may help facilitate the transition of assets after you’re gone.
Please consult financial, legal, or tax professionals for information specific to your situation. The information and material presented are general, may have changed since the published date shown, and should not be considered financial advice. LetsPlan.ca is published in Canada exclusively for residents of Canadian jurisdictions where our products and services may be legally offered. The services offered within this site are available exclusively through our Canadian advisors. While we often provide original content, Twenty Over Ten initially provided the subject matter for this post. It has since been edited, reviewed and approved by our Privacy and Compliance Officer. Advisors may only conduct business with residents of the province(s) in which they are licensed and registered.