5 Simple Estate Planning Ideas For Canadians

We all have heard a story of an estate gone terribly bad. Family members being left out. Wills being contested. Siblings being left out. Relatives coming out of the woodwork looking for a piece of the action.

The fact is, no one gets out alive, but unfortunately, most Canadians make a lot of mistakes with their end of life planning. Mainly, because they do not do some basic proper planning beforehand. Some people think that if they make plans around death that it is a bad omen that will lead to death. This is simply not true.

There are 3 main reasons why we should plan in advance for how we want to be treated at the end of our lives. The first is family harmony. This is the most important because you do not want your last days to be filled with family fighting, and, you do not want your death to be the cause of disharmony for years to come. Secondly, proper planning will reduce time delays and legal costs. Ask someone who has been an executor of an estate and they will tell you how much work was involved and how frustrating it can be in dealing with the legal system. The third reason for planning is that you can reduce the amount of money that will be paid in taxes.

Here are some simple strategies you can implement in your estate planning.

1. Have a proper will. This involves booking an appointment with a Lawyer and drafting a proper will. It will cost you about $1000. There are typically 3 documents that you will need. A will. Powers of Attorney and a Living will. Sure, you can use a will kit and you can even handwrite a will in Alberta. These are wrought with potential problems and unless you have no assets to distribute, these are strongly advised against. when should you get a new will? If you get married or remarried. In most provinces, your will is no longer valid once you get married or remarried. If your circumstances have changed like adding children, having a disabled child, a new business, etc.

2. Understanding probate. If someone dies with assets than they will need to have a grant of probate before the executor can distribute the proceeds of the estate. This process can take anywhere from a few months to a few years. It is a good idea to try and reduce the number of assets that will flow through the estate and attract probate fees. There are probate-able assets and there are non-probate-able assets. 

Probate-able Assets                             Non-Probate-able Assets

Real Estate                                                Life Insurance Proceeds

Mutual Funds                                             Segregated Funds

Investments                                              Property held jointly with rights of survivorship

3. Will Substitutes. Named beneficiaries are one of the best strategies to use to eliminate having probate-able assets. For example, life insurance requires a named beneficiary. It can be anyone you choose, including your estate. If you name your estate, however, the proceeds are now subject to probate and cannot be distributed until a grant of probate has been issued by the court. Having a spouse or child as the named beneficiary means that the proceeds of the policy will flow to them within a short period of time after your death - and tax-free. You cannot stipulate how you want the beneficiary to use the funds - it's their money to use as they please. 

Another good strategy is using segregated funds for your investments. these funds can be used in any account type, RRSP, RRIF, LIF, LIRA, TFSA and non-registered. Because these funds are only available through insurance companies, they have the ability for you to name a beneficiary and have the proceeds of the account go directly to them upon your death and avoid probate costs and delays. These funds provide 2 additional benefits worth noting. They offer creditor protection and they offer privacy. A will is a public document and anyone can gain access to your will once it has been probated. Segregated funds on the other hand, are 100% private and no one could ever know who the beneficiary was or how much you gave them. If you need to distribute your money in a non-equal manner, a segregated fund gives you the ability to this, outside your will, and in a discreet manner. 

4. Trusts. There are numerous different kinds of trusts that families can use to have their assets placed into a Trust for the next generation to enjoy. This is a very complex strategy and requires expertise beyond the scope of this blog. 

5. Funeral expenses. I remember when my grandfather died there wasn't enough money to bury his arse and dad was so annoyed that he had to fork over the dough to cover the funeral costs. That's my main memory of my grandfather. My father went out and made arrangements to look after the final expenses of him and mom. You can buy a funeral plan from your local funeral home or you can set aside $10,000 to $20,000 in liquid cash. If you decide to use cash, make sure it will be readily available when needed, not in a bank account, which could be frozen. The simplest plan is to have a small insurance policy to cover the cost. The proceeds are paid out quickly and can be used for what-ever you want. If you have an insurance policy, the funeral director will allow you to pay your bill after you received the claim benefit.

These ideas are not meant to be legal advice and we have to keep in mind that everyone's situation is unique. Also, keep in mind that these ideas are not exclusive as there are others. We offer our professional advice to set up your affairs in the best fashion so you can plan ahead to maintain family harmony, expedite your estate wrap up and avoid paying too much in taxes.

We specialize in financial and investment planning for those nearly retired or newly retired. We offer an introductory meeting for anyone looking to work with an advisory team that specializes in retirement income planning and we offer planning packages with hourly rates. Click here for more information or call the office at 587-755-0159

Retirement Income & Investment Advisors,

Willis J Langford BA, MA, CFP

Certified Financial Planner


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