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The importance of will and estate planning

Creating a will and estate plan protects you, your estate and your loved ones while you’re living and long after.

By ATB Wealth 8 June 2020 5 min read

According to a comparative study performed by LegalWills.ca in 2016 and 2021, more Canadians are writing wills. While their 2016 findings revealed 26.6% had an up-to-date will, 32.58% of Canadians had an updated will in 2021. 

Even with the increase in wills among Canadians, a high percentage still don’t have legal documents in place to secure all they’ve built throughout their lifetime. Equipped with the right advice and knowledge, you can use a will and estate plan to help your legacy live on. 

Why do you need a will and estate plan?

A will and estate plan protects you, your estate and your loved ones during your lifetime and beyond. Here are a few more reasons to plan ahead and develop an estate plan. 

1. Choose how your assets are managed

You are the best person to determine how your assets should be managed, and a will and enduring power of attorney help you do that.. 

Your will addresses the distribution of your estate— everything making up your net worth, including all land and real estate, possessions, financial securities, cash and other assets. The enduring power of attorney (EPA) is a legal document you create that appoints a representative to look after your financial affairs, if you no longer have the capacity to do so.

While having jointly owned assets with a partner will help when it comes to your assets, having a will and EPA makes the process much smoother.

When someone dies without a will (or “dies intestate”) the court appoints an administrator to deal with the affairs, including the collection of assets, the filing of tax returns and the payment of debts. If you choose not to prepare a will, you forfeit the choice of who will be the executor of your estate and who will receive what assets and when.

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2. Avoid delays with estate administration

Communicating with service providers, government agencies—including the Canada Revenue Agency (CRA)—and service bureaus can be complicated without a will or EPA, causing avoidable delays. Strategic decisions relating to income tax filing that would benefit the estate or a beneficiary cannot be made if there isn’t a valid will or EPA.

3. Protect minors and beneficiaries with disabilities

One of the most important reasons to have an estate plan is to protect minors and beneficiaries with disabilities.

Creating a will allows you to nominate guardians and decide how and when assets from your estate will be distributed. 

In some situations the beneficiary could receive the balance of their interest in an estate when they turn 18. If that estate included proceeds of pensions, real estate, deposits or insurance, that can be overwhelming. A will and estate plan can allow your beneficiary access to their inheritance at an age that you believe they can best manage it.

4. Minimize taxes and fees

Creating an estate plan will help you to minimize income taxes and other costs that can be incurred by your estate.

Your executor may be required to obtain a Grant of Probate—a legal document establishing that the deceased is dead, who the personal representative is, whether there is a will or not and, if there is a will, whether it is the last valid will—depending on the size and nature of your estate. If your assets are in your name alone, some institutions won’t take instructions from the executor unless a Grant of Probate is provided.

In most other jurisdictions in North America, the probate fee—which is paid to the court—is variable and determined by the value of the assets in the estate. In Alberta, the maximum probate fee is $525. 

Even with one of the lowest probate fees in North America, there may be opportunities to efficiently move assets to beneficiaries, including:

  • Designate beneficiaries on registered plans such as RRSPs, RRIFs, RESPs, TFSAs
  • Designate beneficiaries on life insurance policies
  • Establish trusts
  • Gift assets during your lifetime

To find out how you can maximize your legacy, connect with an advisor. 

5. Appoint an executor you trust

When you make a will and estate plan, you choose an executor to administer your estate and carry out the instructions in the will. An executor should be a person you trust,who’s capable of handling your affairs.

Their responsibilities include securing property, getting tax advice, managing risk, valuing assets, selling assets, paying liabilities and corresponding with estate beneficiaries—all of which require a significant time commitment.

When choosing an executor, here are some important factors to keep in mind:

  • Where the executor lives
  • Their capacity
  • Decision-making capabilities
  • Financial responsibility
  • Communication skills

6. Take care of your financial, personal & healthcare decisions

There are two main legal documents you can create to give another person the authority to make financial, personal and healthcare-related decisions on your behalf: an enduring power of attorney and a personal directive.

An enduring power of attorney

An enduring power of attorney designates someone to make financial decisions on your behalf and address your financial affairs if you become sick. Who you nominate in the enduring power of attorney will be responsible for paying bills, accessing bank and investing accounts, paying income taxes, operating a business and more.

A personal directive

In the personal directive, you nominate a party to make healthcare decisions on your behalf. The nominee, known as the agent, will determine where you live, the standard of care you receive and can make end-of-life decisions.

7. Protect other beneficiaries

A well-written estate plan can result in long term financial security for a beneficiary and protect them from others who have conflicting interests. If a beneficiary has a history of poor money management, if there are blended families, creditor issues or if the future of a marriage is uncertain, a will that includes a trust—a legal arrangement that allows a third party to hold assets for the benefit of specified beneficiaries—may provide the protection your beneficiary needs. 

Breadcrumbing

Without a will or EPA prepared, it’s unlikely that there will be a thorough understanding of all of the assets and liabilities of your estate. It is important to document what you own and what you owe.

Without proper documentation, executors of your estate may find themselves becoming private investigators trying to locate assets and questioning whether everything has been identified and collected. If you don’t want to leave a complete list with your executor today, leave “breadcrumbs”—put banking information and passwords in a secure place that your executor has access to after your death. While they will still need to produce documentation such as a death certificate, leaving breadcrumbs can help save them time.

Make an impact that lasts

Creating an estate plan will save you time, money, secure your legacy and provide guidance to those you’re passing your estate onto. . 

Ready to create an impact that will last? Reach out to the experts at ATB Wealth to get the customized advice you need to start your estate planning journey.

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