Estate planning: Don’t put it off

Zoomer | January 1st, 2006

Estate planning is one of those necessary tasks we often keep putting off. It’s not an immediate priority, so we’ll get around to it in due course.

There are two big problems with this kind of procrastination. First, death is not predictable. If something should happen to you before a proper estate plan is in place, the financial consequences for your loved ones could be serious.

Second, the sooner you create an estate plan, the more flexibility you will have to tailor it to your specific family needs. For example, more insurance may be indicated. It will be a lot easier, and cheaper, to buy it when you’re 55 than when you’re 70.

The first step in estate planning is to make list of your objectives. Such as:

  • Ensure that your estate has sufficient cash to pay taxes and other liabilities after your death.
    • Provide financially for your loved ones.
    • Select an executor who will manage your estate to your satisfaction.
    • Leave as large an estate as possible to your heirs.
    • Make sure your dependent children will have a suitable guardian.
    • Distribute your assets according to your wishes.&lt/L>
    • Make gifts to your church, your college, or your favourite charities.
    • Ensure that your children have sufficient funds to acquire a post-secondary education.

    Some common problems to avoid:

    • Leaving any financial burden on your family.
    • Loss of assets due to excessive taxes and fees which could have been avoided.
    • Delays in having your estate settled, causing increased costs and greater distress for survivors.
    • Leaving assets to those who are incapable of managing them properly.

      • Some complex issues to consider:

      • Who should benefit under your will?

        • Take the example of a parent with a spouse and school-aged children. Each spouse might want everything to go to the surviving spouse. It is common for spouses to designate each other as sole beneficiaries, but is that necessarily the best course?

        Can the surviving spouse manage the estate alone? Might it be better for the surviving spouse to receive only the income from the estate during his/her lifetime, without any rights to access the capital?

        If the surviving spouse has access to capital, does the spouse designing the will have any specific purpose in mind for which capital may be used, or are the surviving spouse’s requests for capital to be at the discretion of the executor/ trustee? What if the surviving spouse remarries? Will he/she (and the future spouse) continue to receive the benefit, or is the estate to be distributed to the children at that point?

        • When should benefits be paid?

        Once it has been decided who will benefit, the next decision is what each beneficiary will receive, and when he or she will receive it. Should legacies (cash gifts) be paid to family members, your alma mater, a favourite charity or your church? If so, in what amounts? If the legacy is to be paid to an individual, at what age is it to be paid? And what happens if the person does not survive to that age?

        • What about your personal assets?

        There may be specific items such as antiques and artwork, a coin collection or a cottage, which are left to certain named beneficiaries. It is wise to specify who will receive which items in the will. This will go a long way towards eliminating the possibility of arguments and hurt feeling amongst survivors.

        Alternatively, a side letter, which has been signed on or before the date of the will, and is referred to specifically in the will, accomplishes the desired end.

        Drawing up a list of your broad objectives can be tough spadework. But once you do it, you’ll have a blueprint to guide you in completing your estate plan.