Have you ever considered what will happen to your loved ones once you die? Nobody likes to think about death, but it’s your responsibility to have a post-death plan that ensures your family is cared for and your financial goals are met.
Planning your estate ensures your survivors and dependants continue to enjoy a standard of living they are accustomed to. And, with the right strategy, you can reduce the high costs and taxes that can drain your estate and leave your family struggling after you die.
What exactly is estate planning?
Estate planning comprises a series of documents that outline your wishes after death. The papers describe how you will distribute your money and property when you die and who — your spouse, children or other family members — will receive how much of what.
Estate planning includes the following:
- writing a will
- naming an executor to carry out your wishes as described in your will
- selecting a guardian for your minors
- distributing assets
- arranging assets so you pay minimum taxes
- arranging insurance to cover costs and provide for your survivors
- choosing someone to act on your behalf if you become incapacitated
Why is planning so important?
Contrary to the definition of its name, you don’t need to have a stately manor to plan. Even if you have minimal savings and property, having a plan will still give you and your survivors peace of mind. Dying without a will, called intestate, can be costly and painful to your survivors. If you don’t have a plan in place, your estate can fall into the wrong hands.
What happens if I don’t have a will?
If you don’t have a will, your province or territory will divide your assets. This could be costly and stressful for your survivors, but even worse — it could cause family battles.
If your will is old, it can be challenged and your wishes will go unheard.
How can I manage my estate and reduce costs?
- Leave a will.
- Name a beneficiary who will receive your life insurance or retirement savings.
- Plan and prepay your funeral to ease the pain on your survivors.
- Make sure your life insurance covers necessary estate costs and provides survivors with a steady stream of income.
- Leave some money to charity for a tax deduction in the year of your death.
- Spend any savings in an unsheltered account — not tax-sheltered like RRSPs or RRIFs — first. Funds from a registered account will be given to your spouse or partner if named the beneficiary.
- Have your executor make a final contribution to a spousal RRSP — this can be done up to 60 days following your death.
When putting your will together, check both federal and provincial or territorial laws.