Planning your estate can feel daunting, but it doesn’t have to be. While some may see it as unnecessary, effective estate planning ensures that your wishes are honoured and your loved ones are taken care of. It can relieve your family of the burden of organizing your estate after you’ve passed. While it requires time and effort, taking a few key steps can be incredibly beneficial.
1. Choose the Key People
The first step in planning an estate is choosing the individuals who will play key roles after your passing. Although this task may seem simple, it requires careful thought.
- Executor (or Trustee): The executor is in charge of overseeing the administration of your estate and ensuring your instructions are carried out.
- Custodian/Guardian: If you have minor children, naming a custodian and guardian (often the same person or a couple) ensures they are cared for in your absence.
- Power of Attorney: This is a trusted individual who can make decisions about your property, finances, and healthcare if you’re unable to do so. Often this will be the same person as the executor/trustee.
Be sure to name alternates or substitutes for each role in case your first choices are unavailable.
2. Create a Legally Binding Will
Of course, estate planning involves more than naming a few people; legal documentation is essential. That’s why the next step – writing your will – is often considered the foundation of estate planning. Your will is the legal document that outlines how you want your assets distributed after your death, among other things. While a will can vary in complexity, keeping it simple is an excellent parting gift for your heirs. A clear, straightforward will reduce the chance of confusion and make the legal process smoother for those left behind.
3: Consider the Tax Implications
Another key consideration in estate planning is taxes. In Canada, there is no estate tax, but your assets are considered sold on the day that you pass, often triggering capital gains tax.
This can be substantial, so maximizing your Tax-Free Savings Account (TFSA) and contributing to tax-deferred accounts like an RRSP is essential. While there are other tax reduction strategies, many simply involve paying taxes earlier. In most cases, deferring taxes as long as possible in taxable accounts is the best option; even if the sum of taxes is higher, the remaining amount left over after taxes will also be significantly larger.
In some provinces, there is such a thing as estate administration tax, otherwise known as probate fees. This is payable when your will is submitted for probate (the legal process to validate a will). The amount is usually based on the value of the estate, which includes all assets, property, and investments. Fortunately, there are also ways to minimize this fee. In Quebec for example, the use of a notarized will is common as it avoids the probate process.
4: Document Funeral and Burial Wishes
A step that is often overlooked is planning for funeral and burial arrangements. While it may feel grim or uncomfortable, it’s an important part of estate planning. This includes decisions such as whether you would prefer a burial or cremation, whether you want a large memorial or just a small, traditional gathering, and whether you wish to donate organs or tissues. These decisions help ease the burden on your loved ones during an emotionally difficult time.
Start Now—Don’t Wait
Although estate planning may not be the easiest topic to discuss, it’s an essential one – and it is never too early to start. Having a plan ensures that your wishes are respected, and reduces confusion, legal disputes and delays. Without an estate plan, the government may end up making decisions on your behalf, which is rarely ideal. Consult professionals to assist in drawing up an estate plan. They can ensure your affairs are handled according to your wishes, while also helping you reduce taxes, legal complications, and emotional stress for your family.
