How to establish a plan
It’s not a subject many Canadians like to think about. Recent statistics reveal that almost 50% of us have not even made a will! Even for those individuals who have made wills, a significant portion have not had them professionally reviewed in the past five years. That means a great many Canadians have taken no steps to protect their survivors, and preserve their hard-earned assets. Smart Canadians will use estate planning to accomplish this and a great deal more.
In this first section of our series on estate planning basics, we’ll introduce you to the basic concepts of estate planning and tell you what you need to know to get started on a plan that will ensure the bulk of the lifetime’s worth of assets and savings you have built will go to your loved ones and not to the government. We’ve set up this and subsequent sections in a question and answer format, which we believe is the easiest and clearest way to approach this somewhat complex subject.
What is my “estate”?
Your estate is a legal entity that is created upon your death. It holds all of your personal assets and assumes all of your personal liabilities. In Quebec, it is referred to as your patrimon
Why is estate planning important?
A major incentive behind estate planning is, of course, minimizing the taxes and fees your estate must pay. Effective tax minimization is just as important for an estate as it is for an individual. And probate fees, which are essentially just another tax on your estate, can and should be minimized. However, a well-developed estate plan will do much more than just reduce taxes and fees.
What you want to avoid is the state’s deciding how your assets will be distributed. If you have broad or complex expectations about how your assets will be handled, a sound estate plan has to cover a wide range of issues. Sometimes these issues will conflict with one another. Carefully consider all the courses of action open to you, and weigh the advantages and disadvantages of each.
A comprehensive estate plan will prevent costly errors, no matter how well intentioned. You don’t want to make a change in asset ownership to reduce probate fees, only to find out that this action has triggered greater capital gains taxes. Talk about throwing the baby out with the bath water!
Proper estate planning will be a source of great comfort to your survivors. You will have relieved them of many painful decisions. Take a few moments, close your eyes, and imagine what the consequences would be for your family if you died without a comprehensive estate plan in place. This should motivate you to take action. Too many Canadians fail to act in a timely fashion here, and they place their families at risk. Dying without a will can expose your estate to needless taxation, delays in settlement, and potential legal challenges. It can produce emotional stress and financial hardship for family members while the estate is being settled, and possibly even beyond.
Why do we fail to plan ?
Unfamiliarity with the process is to blame for some of the procrastination in creating an estate plan, but most of it is due to our discomfort in facing the fact that eventually we will die. The thought of planning our will is an unpleasant task. However, the primary reason we do so is to provide for our family’s future emotional well-being and financial security. Remembering this will make it easier for us to do the necessary work.
How to Establish A Plan
Estate planning covers a lot of territory, including selecting the executor (the person, or institution, that will manage the process after you die), selecting beneficiaries, deciding on the timing and the nature of gifts and bequests, minimizing taxes, and possibly creating trusts.
How do I establish my estate plan?
As with any planning process, there are really only three steps to consider. The next section has been designed to assist you with them