Estate Planning 101: what you need to know!

Bill’s Blog April 7, 2021

Did you know that approximately 8 million Canadians have no will? If you die intestate (not having a will), don’t worry; the government has one for you. They will appoint a Trustee to oversee your estate and the probate process at a high cost to all you have worked to build. Plus, even with a simple estate, it can take up to 2 years to complete, and the Trustee is happy to collect fees draining your wealth. 

Essential questions: is there a better way to ensure your wealth goes where you want it and to whom you want it? Also, when should a person get a will? Last question, what are your three most important documents for estate planning? I will focus this blog on answering these questions and providing some important insights.

A will ensures all that you have worked so hard to build will pass on to the people you love or possibly have some of the monies go to charities you are passionate to support. A will needs to fair and equitable, or it may be contested in many Provinces. If the will gets contested this is a very expensive process and prolongs finalizing the estate. Did you know a will is a public document (not secretive)? 

Excellent estate planning should include a family meeting (or the key people to the estate) where the will is thoroughly discussed, and everyone knows your wishes. It is wise to have a trusted financial advisor who creates a simple agenda and facilitates the meeting. This meeting prevents confusion down the road, and critical topics like the executor are appointed. You can have more than one executor, but this can create future problems if the people don’t get along. 

Make sure you appoint the right person as the executor who is detail-oriented and very responsible. Legal requirements are part of being an executor, and the person must fulfill all of them, or they can be personally held liable. I have been an executor, and it is a lot of work. The executor must possess good people skills, be level-headed and handle pressure (often by impatient family members).  

So, at what age should a person get a will? Once a person is of legal age is the best answer (18 or 19 years old). Why? The Humbolt Broncos tragedy (bus crash) is a perfect example. Because there were no wills or power of attorney, parents were not given vital information due to privacy laws. Wills can be changed or amended down the road as your young adult’s lives transition with marriage and children. 

So what are the three most important documents for estate planning for most people? I have already covered the importance of the will. Second, I briefly mentioned a power of attorney. The POT is a powerful document that allows a trusted person to act upon your wishes when you are no longer able. The legal document can cover both health and financial matters. I strongly recommend you have a professional (Notary Public or Lawyer) do these documents, so all the essential items are covered. Please do not cheap out and do it yourself unless you are fully aware of all the rules and laws around these matters.

The third document is a beneficiary designation which is a benefit of life insurance contracts. You will need a knowledgeable life insurance agent to pick the right products or strategies to fulfill your wishes. Why is BD important? The moment you die, all of your assets that are in your estate will be taxable, and for some people, this can be large. When you use life insurance strategies 100% (in almost all cases), the assets stay outside the estate. The monies paid to the beneficiaries are private and distributed usually in less than 30 days (very quick compared to being in probate). Another important point is the payout is tax-free to the beneficiary.

I hope you found this helpful, and most importantly, I hope you take action if you are one of the 8 million Canadians with no will or estate plan. If you need help in the process, please reach out to me: bill@fivefoldfinancial.ca or 778-539-7107.

All the best in 2021,

Bill

PS, I will be doing a webinar soon on “Straight talk on Canadian Real Estate.” You won’t want to miss it, and as a hint, real estate in Canada is in an extreme BUBBLE! You may want to reconsider if you are planning to buy. The webinar will be a 45-minute Zoom presentation with Q&A to follow. I will post the date and time very soon.