5 careful considerations when writing your will
They’re called the “accumulation years,” the 20, 30 or 40 years we work and earn money. During this time we buy a home, own a small business, volunteer, donate to charities, dabble in stocks, buy life insurance. Whatever your assets and interests, they’re your precious own and you want them protected and passed down to good hands.
You know where this is headed, right? You know this article will help you in writing your will and in keeping it updated — not the most enjoyable task, but one of the most important. Yet about half of us don’t have a will or a power of attorney document, says Karen Anne Platten, an Edmonton-based attorney and the chair of the Canadian Bar Association’s National Wills, Estates and Trusts Section.
A power of attorney authorizes someone to act on your behalf. There are two types. One addresses your property and the other addresses your personal care and health-related decisions in case you become mentally or physically incapacitated. A will, on the other hand, addresses your estate on your death. If you do not have a will, the law decides — not you or your family — who can apply to be the estate administrator and how your estate is divided. The distribution of your estate may not be what you want. For instance, in most instances, a preferential share goes to the spouse and then the balance is divided between the spouse and descendants. A clear outline of your wishes, set out in a will, means that family disputes can be avoided too
Here are 5 important issues to carefully consider when writing your will.
1. Who will you ask to care for your “stuff” and for your children?
The executor is responsible for everything after your death, overseeing who gets what and making sure all your debts are paid. Most people appoint their spouse as executor and list a family member or close friend as a back up. An executor can take a reasonable fee, explains Platten, which she outlines in the will itself. The fee depends on the complexity and size of the estate.
A will is meant to handle all aspects of your property. As well, it is normal to appoint guardians for minor children in your will, but since children are not property, what you say in your will about your children will be given significant weight by the courts, but is not binding. If there are minor children, you will need to create a trust for their support.
2. Are there specific circumstances that should be addressed?
Wills are as simple or as complex as your life. Business owners, or people who own shares in another private corporation require special treatment in a will. Complicated family issues, like distributing the estate when there is a second marriage, need careful wording, too. Platten says one of the biggest mistakes people make is not telling their lawyer their entire family story.
3. How are the assets held?
Believe it or not, says Platten, people don’t always own what they think they own. You may have divested a property or transferred a portion of your business years before and forgot about it. “This is important because when you are giving assets away you have to make sure you actually own them,” she says.” Assets can be held in a variety of ways including jointly with right of survivorship; held as tenants in common, where 2 people each have a half interest or held with beneficiary designation.
4. How do you want your assets distributed?
Dealing with children or other dependants fairly does not always mean dealing with them equally. “I’m seeing less equal distribution these days,” says Platten. “One of my clients had 3 kids. The life insurance proceeds went to the 2 younger kids because the eldest had finished university and started working.” Ken McNaughton, a financial advisor in Victoria, B.C. does not draft wills but advises his clients to divide their estate using percentages rather than fixed dollar amounts, because an estate’s value changes over the years. If you wish to leave an additional amount to someone — privately — McNaughton and Platten suggest using an insurance company contract, either life insurance or investment account, which can name a designated beneficiary. The death benefit paid under a life insurance contract and certain non-insurance plans does not form part of the estate, and will remain private when paid out to the named beneficiary. Note, however, that if the testator has not adequately provided for dependants, in some Canadian provinces a court can order that all or part of the insurance money be paid to the estate or specific dependants. If the executor asks the insurance company about insurance that was in place and to whom it was payable, the insurance company will generally provide that information to the executor.
5. When should you change your will?
You don’t know when but your family will need to use your will so keeping it current is the responsible thing to do. Anytime there is a change in life, your will needs to change too. Marriage, re-marriage, separation, divorce, birth or adoption, the death of a spouse or of an executor are all reasons to make changes. “Look at your will at least every 3-5 years because we forget what they say,” says Platten. “Over the course of 30 years, there is no way your life stayed the same.”
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