The four cornerstones of your estate plan
Are you waiting to be wealthy enough, or old enough, to think about having an estate plan? Do not wait, because estate planning is a fundamental part of establishing financial security for all Canadians. Your estate plan ensures that the right people are designated to make important decisions when you can’t, and that your property can be efficiently passed on to those you want to receive it.
A solid estate plan rests on four cornerstones: your will, a power of attorney for property, a power of attorney for medical care, and a life insurance strategy.
1. Your will. According to several recent surveys, only about half of Canadians have a signed will. Your will sets out how your assets are to be distributed after death, and names one or more executors (called estate trustees in Ontario; liquidators in Quebec) to wind up your affairs. If you die without a will, provincial law dictates the distribution of your wealth among your relatives without regard to need and with no provision for friends and relatives beyond your immediate family. It’s best to have your will drawn up professionally to make sure that all “what-ifs” are covered and that your wishes conform to the law of your province.
2. Power of attorney for property. This document names one or more trusted people to make decisions about your assets and liabilities if you should become incapacitated. You might assume that your spouse can simply take over if you become incapable of making decisions. That’s immediately true only if your spouse is named in a power of attorney. Otherwise, your affairs may be tied up until a court or a provincial public trustee decides that your spouse is fit for the job.
3. Power of attorney for medical care. This document is also known as a medical directive or living will (known as a mandate of incapacity or protection mandate in Quebec). It is often prepared at the same time as your will. It indicates who should make decisions about medical care and how far doctors should go to prolong your life. The goal is to clearly indicate your wishes and avoid arguments that could tear apart your loved ones.
4. A life insurance strategy. Complete estate planning should include seeking advice from a licensed Life Insurance professional. A life insurance strategy is designed to protect your family’s lifestyle if you die prematurely. That need may end or diminish once children are grown, but you might still want coverage for debts, as well as taxes due at death. Life insurance can also fund a significant bequest to one or more favoured charities.
If you don’t have an estate plan in place, now is the time to get started. And remember, life changes such as marriage, divorce, children, or a change in financial circumstances should lead to a review of your plan. Keep in mind that moving to another province may also lead to a review as, in Canada, estate law is a provincial matter. Reach out to your advisor today if you have questions about your estate plan.