While there are many elements to a comprehensive estate plan, two elements are considered the cornerstones of estate planning and should be prepared by all competent adults. These are a will and powers of attorney (mandate in anticipation of incapacity or protective mandate in Quebec) for both property and personal care.
Studies have shown that people delay preparing their will for a number of reasons. Some may feel they are too young, others that they don’t possess enough, still others that they have “lots of time”. Whatever the reason, approximately 50 per cent of adult Canadians die each year without having prepared a will (known as intestate). If you die without a valid will, your estate will be distributed according to an arbitrary provincial formula, which may not reflect your wishes. You also lose the right to select the executor of your choice to administer your estate and forfeit certain probate and tax planning opportunities. Generally speaking, it is more costly and time – consuming to administer an intestate estate.
While your choice of beneficiary or beneficiaries may be obvious (for most people this means family and/or charitable organizations), careful consideration should be given to how and when your bounty should be passed on. For example, would an outright distribution or an ongoing trust be more appropriate? Consideration must also be given to any legal obligations (to a spouse, to dependents, under a domestic or business agreement) you may have. It is also recommended that you name contingent beneficiaries to address the possibility a beneficiary may predecease you or die before receiving their full entitlement. A failure to plan for such contingencies may result in confusion, (partial) intestacy and additional cost.
Choosing an Executor
Your executor (liquidator in Quebec) is responsible for administering your estate according to the wishes set out in your will. Being appointed as executor is an honour but also a highly demanding responsibility with many duties. The emotional strain can be high and family conflict is not unusual. When choosing an executor, thought should be given to the expertise, availability and willingness of the individual you are considering to assume the duties and responsibilities involved. If you are appointing fan individual, be sure to name an alternative to cover the possibility your first choice may be unable or unwilling to act. Depending on the circumstances, a corporate executor may be your best choice.
Powers of Attorney
A power of attorney is a legal document that gives someone else the right to act on your behalf. There are two basic types: for property management and for personal care. In British Columbia, representation agreements govern the latter and may also be used in respect of the management of property. The equivalent in Quebec is the protective mandate and provides for both property management and personal care. All provinces provide for “both types” though terminology may vary. Should you become incapable of managing your financial affairs or making decisions about your personal care and you do not have power of attorney in place, an application to court may be required to appoint someone to make these decisions for you.
Choosing an Attorney
Acting as an attorney entails significant duties and obligations and a potential long-term time commitment. You should be aware of the potential that the document could be abused and ensure you appoint a reliable and trustworthy individual and/or institution to act as your attorney.
Keeping your plan up to date
It’s important to review your estate plan periodically to ensure it continues to reflect your wishes and personal situation. You should make sure your choice of executor and attorney remains appropriate. As a general guideline, you are encouraged to review your estate every three to five years or whenever you experience a significant change in your personal or asset situation.
Jim Eng is a Wealth Advisor for Scotia Wealth Management. You can reach him at firstname.lastname@example.org or at 204-946-9207 or |-800-324-0266.