Estate planning: Begin with lists

You don’t have to be a millionaire to have an estate. People who’ve worked all their lives, own homes, recreation properties, a few valuables and investments also qualify.Planning what you want done with these assets after your death is a chore. It’s necessary, but not fun to do. However, should you die without an estate plan in place, the financial consequences for your inheritors could be serious.

But how to begin? As with most enterprises, it’s one step at a time. Creating an estate plan is a process. The first step is determining exactly what you own.

List assets
Start by making a list of your assets, to get an estimate of what your estate is worth. This is also known as your ‘gross estate’.

Your list of assets might include:

  • Real estate: your home, perhaps a cottage or a rental property
  • Personal property: cars, a boat, jewelry, art or antiques
  • Canadian and foreign securities: CSBs, GICs, bonds, mutual funds, stocks, etc.
  • Registered investments: RRSPs, RRIFs, LIFs, pensions and annuities
  • Insurance policies
  • Business interests (proprietorships, ptnership, etc.)

Remember to list not only what you own, but also how you own it. The latter will definitely influence your estate planning. For example:

  • Is your spouse the designated beneficiary on your RRSPs and insurance policies, or is it your estate? What about employer pension benefits?

Clearly note which assets you own jointly (whether with your spouse, or some other person), and what you own singly. Your ownership of assets will decide whether they will pass to the beneficiaries through the will, or outside the will. If it’s the latter, it won’t form part of your estate for probate.

Types of Property
Since we’re discussing assets, it’s worthwhile to expand on the term ‘property’. We often think of property as land, but actually the definition is much broader. The easiest way to describe what constitutes ‘property’ is by giving specific examples: 

  • Tangible personal property: These things have a physical existence, they’re tangible. This category includes your car, boat, household furnishings, etc.
  • Intangible personal property: While you can feel a dollar coin, or a $20 bill, or an investment certificate, they are not, in fact, tangible. These are examples of intangible personal property. Add to this group share certificates, bonds, receivables, business interests, etc.
  • Real property: This category is probably responsible for the general misconception regarding the term “property”. Real property means real estate, which itself is the land and things permanently affixed to it, the buildings on the land, and the rights of ownership that attach to them.

List liabilities
Once you’ve created a complete list of your assets, the next step in the process is to list your liabilities-what you owe. 

  • This may include mortgages, bank loans, and credit cards.
  • It may also include business loans, and accounts payable.

Your net estate
Deduct your liabilities from your gross estate to arrive at your ‘net estate’. Remember, after your death there will be other liabilities such as:

  • Probate fees
  • Legal fees
  • Executor’s compensation which will be payable from your estate.
  • Income taxes

An important part of your estate plan will be addressing how to pay the tax bill that is likely upon your death. If you begin estate planning early on, you’ll have more flexibility and time to anticipate the unforeseen such as tax bills. That’s the upside of planning.