By Miles Clyne
A will and estate plan are to help organize your affairs and ensure your assets pass tax-efficiently to your beneficiaries in the event of your inevitable or unexpected passing. Half of Canadians (51%) say they have no will in place, while only a third (35%) say they have one that’s up to date. That’s totally okay if you don’t care about the cost or effort it takes to sort this out after you’re gone.
A will and estate plan formalizes your intentions and prevents anyone else from making a claim against your estate or challenging your beneficiaries. It also helps to ensure your loose ends like funeral costs are taken care of.
If you have minor children, it’s vital to specify who will care for them in the event of your death. Besides making your wishes about guardianship known, this can help avoid custody disputes and family strife. If you’re the sole income earner you also need to plan for the financial well-being of your dependents should you die unexpectedly.
Without a will your property will be distributed to your spouse and blood relatives according to provincial law. If you have no spouse or blood relatives your estate will go to the provincial government. The government is totally fine with this but maybe your favorite charity would be a better home for what you leave behind.
When you die you’re considered to have sold most of your assets for tax purposes at their fair market value. You can help reduce unnecessary delays in settling your estate by naming beneficiaries on your investments. This allows the money to bypass the estate process and be paid directly to your heirs.
Another common way to reduce estate costs is through joint ownership of assets like your principal residence and bank accounts. Jointly held assets go to the surviving owner and aren’t part of the estate. While effective for reducing probate fees and deferring taxes, jointly holding assets can be problematic so it’s important to proceed carefully and understand the ramifications which is another reason getting professional help can pay for itself.
Proper planning can help make sure your wishes are carried out, that your family is looked after and that your assets are distributed in an orderly way that will minimize the tax burden on your beneficiaries and your estate. If you have no will and estate plan or it needs to be updated, don’t put it off, procrastination can have major consequences.