Estate planning is really “people planning.” A little time invested in getting your estate in order now can help ensure you leave an enduring legacy for your loved ones.
Comprehensive financial planning extends beyond your lifetime to include the next generation and the people you want to care for. Market risk may be important when you’re benefitting from your wealth, but when planning your estate, there are other risks to consider as well. A poorly planned estate or no plan at all can result in costly legal issues and family breakdowns that can tarnish your legacy.
Having an estate plan can be the best way to protect, build and preserve your assets so that your heirs benefit from your gift in the way you intended.
It starts with a will
Your will is the critical starting point of your estate plan, no matter how simple or complex your financial situation. It outlines how you want your estate to be divided, ensuring that your assets are distributed as you’ve set out rather than as the laws in your province or territory dictate.
A will can also name guardians for minor children and even make provisions for pets.
When properly drafted and up to date, your will paves the way for a smooth transfer of wealth to your heirs according to your wishes. It prevents questions about your intent and helps to avoid administrative delays, unnecessary expenses and family discord.
Estate planning and the power of a POA
A “power of attorney” (POA) gives one or more people the authority to manage your affairs on your behalf. There are POAs for finances and property, as well as for health and other types of personal and non-financial decisions.
Despite the powerful benefits of assigning a financial POA, from being a safe way to manage your financial affairs to offering flexibility and convenience, fewer than half (40%) of Canadians have one in place.1 A financial POA can offer peace of mind for everyone involved by allowing you to appoint someone you trust to “be you” and have authority over all or some of your finances and property. Without these legally binding powers, the court may need to be involved in selecting others to act on your behalf.
A general POA allows someone else to oversee your finances or property – for a limited task and/or timeframe – only while you’re mentally capable of managing your affairs. An enduring or continuing POA lets your attorney continue acting for you if you become mentally incapable of managing your finances and property.
A medical POA appoints one or more people to make medical decisions on your behalf if you’re unable to. It’s critical to have this document in place, but even more important to name the right person, or people, as your agents. It should be someone who’s not your spouse or partner in the event both of you are incapacitated at the same time. The added advantage of naming more than one person to act for you is that if one agent is unable to participate in the decisions, the other agent(s) can.
Organizing your POAs is an opportunity to talk about your wishes and future expectations about your finances and healthcare with your family and whomever you’re naming as your agent(s). Open dialogue allows you to build stronger relationships with loved ones and helps to prevent family feuds during times that may be highly emotional to begin with.
Keeping it current
While half of Canadians have a will, including the majority of seniors, many may have an outdated one. According to 2019 data from the Government of Canada, most Canadians (92%) aged 65 and up had a will, but half (53%) hadn’t updated it for at least five years. Overall, three quarters (75%) of Canadians with POAs had not updated them for at least five years.2
It’s a good practice to review your estate plan at least every five years or when your circumstances change. Such as, following the birth of a grandchild, for example, or as your long-term care needs evolve.
Moreover, an estate plan isn’t useful if you don’t appoint the right person to carry it out. For example, a will made years ago may name executors who were appropriate at the time but aren’t any longer due to death or other life changes. If that’s the case for your will, you should update it.
Estate planning for your situation
No one can predict the future, but you can play a part in creating a brighter tomorrow for your heirs through a well-crafted estate plan. Contact our office today to discuss your estate planning needs.