Making an estate plan

Sex, money and death-three topics most Canadians are reluctant to discuss. Estate planning focuses on the latter two issues, making it, arguably, the most sensitive aspect of financial planning.But if you do not take the time to organize and execute your estate plan, the government has its own rules that determine how your assets will be distributed on your death and who will make decisions on your behalf.

Even if you don’t really want to think about your estate plan, you are probably already making financial decisions that affect your estate. For instance, setting up a savings or an investment account in your own name or jointly with another person has estate planning implications.

An account registered as joint tenants with rights of survivorship would most likely not be transferred according to the instructions in your will. Similarly, leaving your RRSP or RRIF to your estate, or naming a beneficiary on your RRSP or RRIF, also affects your plan.

Will is cornerstone
Astonishingly, it’s estimated that approximately 50 per cent of Canadians have not prepared a will-the cornerstone document of any estate plan. A will is crucial cause it allows you to specify precisely who gets what and when, ensuring your estate does not have to be settled according to your province’s intestacy rules. (Intestate refers to dying without a will.)

If you do have a will, be sure to review it periodically to make sure it’s up-to-date and reflects your current wishes and lifestyle. I’ve read many wills over the years, and most of them could have used a little tweaking.

Some would have benefited from simple changes, such as replacing the person originally named as the executor with someone more suited to the task at the given time. Other people miss new planning opportunities to reduce their tax bill at death or save their beneficiaries future tax dollars.

Tax considerations
An important goal when it comes to the tax aspects of estate planning is to make sure you don’t pay more tax than necessary, any sooner than you need to. 

When designing your estate plan, it’s a good idea to list all the people and charities you want to benefit from your estate. While everyone has different goals and objectives, most people I know forget to include themselves as one of their favourite beneficiaries.

Ask yourself this key question: do you want to leave as large an estate as possible or have your last dollar run out with your last breath? Only you can decide.

Some key issues
Estate planning is much broader than keeping an up-to-date will or determining how much life insurance your beneficiaries may need.

Some of the key estate planning issues include vital documents every Canadian should have, the tax realities of dying, minimizing the cost of probating your will, whether you should be an executor, making the most of your charitable donations, trusts, dealing with your cottage, and much more.

Even though estate planning weaves in and out of various aspects of your financial life, it does not have to be complex or complicated.

Details fit together
Some estate planning strategies work well together, others contradict each other. For example, if you want to leave everything to your spouse in a testamentary trust in your will – this could reduce his or her tax bill after your death – be aware that such a strategy might not work if you own everything jointly today, since these assets would be set up to bypass your will.

In other words, it’s how the details fit together that will make your estate plan work to best meet your needs and the needs of your loved ones.

Sandra Foster is a best-selling author of three best-selling books, including You Can’t Take It With You: The Common-Sense Guide to Estate Planning (John Wiley, 1999).