5 steps to estate planning success

Is your will looking a bit dated? You’re not alone.

More than half of Canadians don’t have up-to-date wills and almost two-thirds haven’t prepared powers of attorney, according to a LawPRO survey. But most acknowledge they should have these important documents.

A properly drafted will is the centerpiece of your estate plan. Dying “intestate” (without a valid will) means:

• Your assets will be distributed according to the formula set out in legislation, which won’t consider your personal wishes;
• you won’t be able to take advantage of any income tax and probate planning opportunities, meaning less of your estate will make it to your family;
• you won’t have testamentary trusts for any special needs beneficiaries, or be able to appoint guardians for minor children and to make charitable bequests;
• your estate administration will likely take longer and cost more; and you’ll have no say on the person administering your estate.

So follow these steps, and review your will every three to five years, or if your financial situation changes.

Step 1: Identify assets and liabilities

Assets can include: investments (stocks, bonds, mutual funds, bank accounts); retirement plans, including RRSPs, RRIFs, pensions and annuities; personal property (jewellery, cars, artwork and antiques); real estate; insurance policies; and business interests.

Consider not only what you own, but how. Assets you own jointly with right of survivorship may be treated differently upon death than assets owned in your name alone. And note designated beneficiary of assets such as RRSPs/RRIFs, life insurance and tax-free savings accounts.

Step 2: Decide how to distribute assets

Decide who gets what, but also plan for the possibility that a beneficiary may die before you do. Where will that portion of the estate go? Also, be realistic and consider any restrictions on your estate such as any contractual obligations you have, as well as spousal or dependents’ rights.

Step 3: Determine the best plan for transferring wealth

Should your assets be transferred outright or by way of a trust? A trust distribution under the will may be preferable when you:

• have minor children or grandchildren and/or beneficiaries with special needs;
• have assets you wish to preserve and transfer across generations;
• want to leave a charitable legacy; and/or
• are in a blended family.

Also, investigate the advantages of beneficiary designations and inter vivos trusts.

Step 4: Choose the right people

You’ll need an executor, trustee, attorney and potentially a guardian for minor children.

Your executor administers your estate. Your trustee manages trusts you or your will establish. Your attorney manages your financial and/or personal care under the power of attorney document you’ll create. The exact titles of the people and names of the documents vary from province to province.

Professional corporate trustees are a good choice if your estate or family arrangement is more complex than usual, or if you fear family conflict.

When you appoint an individual as executor or attorney, name an alternate in case your first choice becomes unable or unwilling to act.

With minor children, you should think about who will be guardian or tutor in the event both parents die. Although it’s subject to court approval, an appointment by will is generally recommended since it can take effect immediately, and provides a clear indication of your wishes.

Step 5: Document your plan

Before you meet with an estate planning professional, should prepare an inventory of your assets and liabilities, including:

• personal identification;
• marriage contracts or separation agreements;
• real estate documents;
• partnership or shareholder agreements and other private company documentation;
• recent tax returns; and/or
• your current will and powers of attorney.