Estate planning isn't something you should wait to do until retirement or when thinking about retirement. Estate planning should be started as soon as you acquire assets that may need to be transferred to dependents or loved ones. Estate planning should be discussed with professional legal and financial advisors.
We do not know what our future holds for us, we're not able to predetermine illness, accidents, natural disasters, death or when we will become mentally incapacitated. Are you prepared if any of these events occur this year?
What will your dependants do in the event that you become incapacitated and no longer able to care for them or yourself? These are the reasons for preparing an Estate Plan.
Consider doing the following to protect your assets and your loved ones in the event that something unexpected happens in this New Year.
- Prepare a will
- Prepare an estate plan
- Be prepared with Power of Attorney for Personal Care and Finances
Preparing a will
Preparing a will is something that everyone needs to do. If you die without a will, you die intestate. This means that your estate is settled by someone else, usually the government and may not be done according to your wishes.
A will is a changing document over one's lifetime. As circumstances change your will may need to be changed especially in events such as divorce, death of loved ones, additional births, adoption of children. There are many reasons you may want to change or revise your will.
When you prepare a will you need to appoint an executor, who will administer your wishes according to your will. The executor also has some legal obligations to perform as part of this role. They must file income tax returns on your behalf, protect your property and pay off your creditors with estate assets.
When choosing an executor it is best to consider whether or not they are capable of handling the duties that will be expected of them. It's a good idea to discuss with whoever you're thinking of choosing to be executor to see how they feel about performing the duties of the role.
Preparing an estate plan
Preparing an estate plan ensures that your affairs will be handled according to your wishes and that your family will be taken care of in the event you become incapacitated or die. When you have prepared your estate plan you will have prepared a will, done some tax planning for your assets in the event of your death and you will have signed Powers of Attorney for Personal Care and Finances.
Tax Planning for your assets
Tax Planning for your assets is a way to reduce taxes payable upon your death.
There are several ways you can reduce estate taxes:
- make charitable donations prior to or upon your death
- set up RRSP's for your spouse or dependent children where possible
- distribute assets to your loved ones prior to death
- take advantage of income splitting opportunities
- set up individual or family trusts
Before considering which measures are in your best interest when estate planning you should consult a financial adviser and a lawyer.
Powers of Attorney for Personal Care and for Finances
A power of attorney is a legal document which may be used to authorize someone else to make decisions on your behalf. Once signed they give the authorized person the authority to begin to make decisions on your behalf immediately in some situations. Please consult a lawyer when preparing Powers of Attorney.
Power of Attorney for Personal Care gives an authorize person(s) authority to make decisions for you regarding your personal care. These decisions can involve making medical decisions on your behalf, or deciding where you will live if you are unable to take care of yourself. You want your authorized agent to be aware of what your personal wishes are regarding your care in the event that you become incapacitated. I'm sure we all remember the Terry Schivo or Terri Schiavo situation. (I researched the correct spelling on the Internet in a google search and the results brought up both spellings of her name.)
When you have these Powers of Attorney prepared you will need both the Power of Attorney for Personal Care and the Power of Attorney for Finances. The Power of Attorney for Finances allows someone you authorize to make decisions on your behalf regarding your finances. This authorized person can access your bank accounts, sell property, pay your creditors once the power of Attorney for Finance is signed. You'll want to make the decision carefully on who you appoint as your Power of Attorney for Finance.
