The essentials of estate planning
“In this world, nothing is certain but death and taxes.” The famous American, Benjamin Franklin, wrote those words over 200 years ago and they still ring true today.
Most of us tend to avoid thinking about the end of our life and most, if not all, of us certainly do not enjoy paying taxes. But you should think ahead and establish an estate plan now. By clearly stating your wishes for how your legacy should be passed on, you will protect your family and reduce the taxes levied against your estate.
Here are the essentials of an estate plan:
- Will: Designates how your estate should be distributed.
- Living will: Provides direction for your care in the event of catastrophic illness or disability.
- Enduring power of attorney: Also called a ’mandate in case of incapacity’ in Québec, it provides direction for how your property will be managed in the event of incapacity.
- Executor: Sometimes called a personal representative or a liquidator, is the person named in your will to settle your estate according to your documented wishes.
- Guardian: A legal representative to take care of your minor children. Make sure you discuss with the individual before appointing them a guardian.
- Insurance: If you do not anticipate that your estate will have sufficient liquid assets to cover the taxes on your assets, consider purchasing insurance.
- Trust: Ensures that part or all of your estate be held by a trustee until a beneficiary reaches a certain age. Trusts in your will can also be used to reduce taxes for the beneficiaries.
- Funeral services: Services can be prearranged to save your estate some money, avoid extra stress on your survivors, and ensure the service is according to your wishes.
- Financial assets: Should be comprehensively listed in your records, including bank accounts, insurance policies, investment accounts, and other financial information. Be sure your executor and/or survivors know where to find them.
- Special circumstances: An estate plan becomes even more essential if you own a business, are divorced, are part of a blended family, live in a common-law relationship, have disabled dependants, or are responsible for the care of elderly relatives.
Creating an estate plan now avoids difficulties and costs later. To do it properly, you’ll need an estate lawyer and perhaps an accountant, along with your financial advisor who can ‘quarterback’ your estate planning team and keep everybody on track with your wishes for your legacy.
June 26, 2015