Personal Aspects of Estate Planning 15

Personal Aspects of Estate Planning

• Estate planning involves having a definite plan for administering and disposing of one’s property during life and after death
• Estate planning components include building an estate through savings, investments, and insurance
• Estate planning components include transferring an estate at death in a specified manner
• A will and trust agreements are ways to implement estate planning
• Knowledge in estate planning areas and good record-keeping are helpful
• Getting married voids a will made prior to the marriage
• Divorce or separation may affect the validity of a will
• Estate planning has an impact on capacity to order the disposition of a will
• Dying without a will (intestate) means the estate is distributed through the legal system
• Daily living can hinder thinking about death and estate planning
• Rationalizing delays estate planning because people are unsure what information is needed
• Estate planning should occur while in good health

Legal Aspects of Estate Planning

• Proof of claims must be produced upon death
• Important papers to maintain include birth and marriage certificates, legal name changes, and military service records
• A will is the legal declaration of a person’s mind as to the disposition of property after death
• Dying intestate results in provincial law of descent and distribution acts as a will
• Spouses receive preferential share and balance is distributed to dependents when intestate
• Marriage and divorce affect wills
• Reviewing a will with an attorney is important due to marriage and divorce
• Marriage may revoke wills
• Preparing a standard will can cost $400 or more; costs vary with complexity

Will Clauses

• Identification and Revocation Clause identifies the residence and declares the will as the last will
• Appointment of Executor(s) Clause designates the executor and may provide compensation
• Payment of Debts Clause directs the executor to pay debts like mortgages, loans, funeral expenses, etc
• Payment of Taxes and Fees Clause authorizes the executor to pay income tax or probate fees
• Specific Bequests Clause outlines the distribution of specific personal property
• Life Interest Clause applies when leaving someone the income or enjoyment of an asset
• Encroachment Clause enables the trustee to provide additional funds for special needs
• Common Disaster Clause outlines asset distribution if beneficiaries die simultaneously
• Survival Clause states a beneficiary must survive for a set period (often 30 days) to benefit
• Guardian Appointment Clause designates guardians for minor children
• Testimonium and Attestation Clauses ensure legal requirements for a valid will are met

Types and Formats of Wills

• A holographic will is a hand-written will made by the individual, but it may not be legal in some provinces
• A formal will can be prepared by an attorney, typed, or be on a preprinted form, naming beneficiaries
• The formal will must be signed and have two witnesses
• A notarial will is available only in Quebec, is made in the presence of a notary and one witness, and does not require probate
• A beneficiary is a person named to receive property and cannot be one of the two will witnesses
• Probate is the legal procedure of proving a valid or invalid will
• Probate court validates wills and ensures debts are paid
• Executor responsibilities include preparing an inventory of assets and liabilities
• Executor responsibilities include collecting monies due, paying debts, preparing tax returns, and distributing the estate
• Selecting an executor involves finding someone willing and capable
• The court appoints an executor if one is not named
• If there are minor children, a will is needed to name their guardian
• A guardian assumes responsibility for personal care and managing an estate
• A trustee manages property for someone else under a trust agreement
• A testator must clearly state their full name and residency
• A new will renders former wills inapplicable
• All living relatives must be named in a will
• All assets, valuables and property should be listed in a will
• A testator must appoint an executor
• A testator must sign the will with two witnesses
• The will needs to be kept in a secure place
• A codicil is a document that modifies provisions in an existing will
• A prenuptial agreement waives rights to each other’s property acquired before marriage
• A prenuptial is an agreement on settlement in case of divorce
• A living will enables an individual to express the intention to end life if terminally ill
• A living will needs to be discussed with family and doctors
• A living needs to be signed, dated before two witnesses and copies need to be given to those close to the testator
• An ethical will dispenses emotional and spiritual wealth to heirs and is not legally binding
• A power of attorney is a legal document authorizing someone to act on your behalf if ill or incapacitated
• Power of attorney can be special, to carry out certain acts, or general, to act completely
• A conventional Power of Attorney is automatically revoked in case of legal incapacity
• A letter of last instruction is not legally enforceable
• A letter of last instruction provides heirs with important information
• A letter of last instruction should include funeral preferences, names of people you want notified, the location of bank accounts, assets, and debts

Trusts and Estates

• A trust is a legal arrangement where a trustee holds assets for beneficiaries
• The settlor is the creator of the trust
• All trust assets are known as an estate
• Trust benefits include reduced estate taxes, avoided probate, and freeing grantor from managing assets
• Trust benefits include providing income for a surviving spouse, ensuring property serves a desired purpose after death
• A living (inter vivos) trust is created and provides benefits while you are alive
• A testamentary trust is established by the creator’s will and becomes effective on death
• A spousal trust requires all income be paid during the spouse’s lifetime
• Capital cannot be distributed to anyone else during the spouse’s lifetime in a spousal trust
• Pros of a trust include redundant probate, more privacy, and authority to manage assets if disabled
• Cons of a trust include needing proper funding, higher setup costs, and potential need for a will
• An inventory of an estate includes cash, bank accounts, stocks, bonds, life insurance, real estate, and business interests
• Life insurance, annuities, and RRSPs go directly to the named beneficiary
• Assets held in joint tenancy confer rights of survivorship
• Life insurance and employee benefits are free of income tax and are excluded from probate
• Lifetime gifts and trusts are estate assets not distributed by a will
• With a will, the executor carries out wishes when settling an estate
• Probate and administrative costs include fees for attorneys, accountants, appraisers, executors, and administrators (3-5%)
• If you die intestate, the estate is distributed according to provincial law
• Estates that die intestate are under the control of court-appointed administrators