Few people are excited by the thought of planning their estate. After all, it’s about your own mortality. But it might be easier to address if you reframe it as a caring gesture to your loved ones. It’s a process that will make your passing easier to deal with for them, because you’ve planned ahead. So let’s take a look at some of the things you should keep in mind to get started with estate planning.
The will: The backbone of estate planning
The most important thing to do when planning your estate is to have a will. It’s a legal document that states how your assets will be distributed and who will look after your dependants. Surprisingly, 56% of Canadians do not have a signed will.1 If you pass away without a will, your assets are distributed according to provincial and territorial legislation, which means it won’t necessarily happen the way you or your family might have wanted it to. This can lead to stress and expense for your family. So it’s best to have a legally binding plan in place. Here are some steps to take to create a will:
- Start with a plan: Before you get started on your will, have your plan in place. You can talk to your spouse and family, or even a financial advisor, and decide the best way to allocate your assets. Make a list of those assets, then think about distributing them. Who gets your house or cottage if you have one? How do you split any financial assets? What about jewellery and collectibles? If you have young children, who will raise them? Do you have a pet? Do you want to leave anything to charity?
- Select an executor: This is a reliable person who you task with closing up your estate. They may have to sell real estate, pay taxes and distribute your assets. The executor should be a close friend or family member (preferably younger than you, so chances are they’ll be around when you pass away), or even an accountant or lawyer.2
- Talk to a lawyer… or don’t: It’s a common misconception that you have to use a lawyer to create a will. It can certainly help, especially if you have a more complicated situation, for example if you own a business, if you’re wealthy and have many valuable assets that may not all be in Canada, or if you’ve had multiple marriages and children. But all you really need to do is write down your wishes, and the document must be signed and dated by two competent adults who are present at the same time.
- Keep it in a safe place: This may seem obvious, but you don’t want your family or executor scrambling to find your will after you pass away. Make sure to tell them very specifically where it is and don’t move it from that place.
Designate a Power of Attorney
Another legal document that’s good to have is a Power of Attorney, also known as a “living will.” It establishes who has the right to act on your behalf if injury or illness prevents you from speaking for yourself. The word “attorney” often leads to confusion about whether or not this person needs to be a lawyer, but it can be anyone you trust to make financial and medical decisions on your behalf. While you can set up a Power of Attorney online or using a template, the Canadian Bankers Association advises you to consult a legal professional.3
Name your beneficiaries
Another key part of estate planning is ensuring any investments or insurance policies have up-to-date beneficiaries. This can include things like RRSPs, life insurance policies, or disability insurance policies.
Protect your family’s financial future
A life insurance policy can also be a key component of your estate planning. It can protect your family’s financial future by providing a tax-free, lump-sum cash benefit after you pass away, which can be used however your beneficiaries choose. For example, if you pass away before your home is paid off, a life insurance benefit can help pay it off, so your beneficiaries don’t have to worry about your mortgage. Engineers Canada-sponsored Term Life Insurance is an affordable way for members to acquire strong financial protection.
If you keep the above tips in mind, it’ll go a long way towards helping your family get through a difficult period.
The information in this article is not to be relied upon as legal, tax, financial, or investment advice for specific situations.