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Wills and Probate Planning

Planning for our deaths is imperative to protect our assets and our families. This is a conversation that we prefer to delay for as long as possible but needs to be had much earlier in our lifetimes than many people expect. This is particularly true if we have others depending on us and if we begin to accumulate significant assets.

A power of attorney (POA) is authorized to act on your behalf if you become unable to act for yourself due to physical or mental infirmities. You will need to appoint two powers of attorney: one to look after your finances and one to look after your health-care needs. Your financial POA is authorized to sign legal documents on your behalf, make payments from your financial accounts and sell your assets. Your health related POA makes decisions regarding your housing, medications and procedures that you need, and whether you should remain on life support. As these individuals have complete control over your life, they are typically the people closest to you and that you have complete trust in, such as your siblings, children, other family members or friends.

A POA is only authorized to act on your behalf during your lifetime. You will also need to appoint the executor of your estate to handle your affairs after death. Your executor is named in your Will. This individual is responsible for submitting your final tax returns, paying your tax obligations and other liabilities, and distributing your assets based on your wishes. Depending on the complexity of your estate, this job can be a significant undertaking. You must ensure that your executor is both trustworthy and capable of handling this task.

Your Will also outlines how your estate will be distributed to your beneficiaries upon death. Your estate comprises the assets owned at the date of death. In Canada, this estate is often subject to a legal process called probate. A trustee of the estate, typically the executor, will apply to the courts to certify that they are authorized to act on behalf of the estate and formally approve the validity of the Will. Probate fees will then be assessed based on the value of the assets and laws of the province in which the estate is administered. These fees can be minimized with proper planning. Many assets should be transferred directly to your beneficiaries at the time of death without passing through your estate. Registered accounts, such as Registered Retirement Savings Plans, Registered Retirement Income Funds and Tax-Free Savings Accounts, should have individuals named as beneficiaries. Ownership of these accounts will pass directly to the beneficiary at the date of death. Proceeds of a life insurance policy should transfer directly to a beneficiary as well rather than through your estate. Other assets such as homes, cottages or non-registered accounts can be held joint with the right of survivorship. This means that you jointly own the asset with another person, such as your spouse, common-law partner or children, and the surviving joint owner will inherit the other’s share after they pass.

In certain provinces such as Ontario, you may also have multiple Wills to minimize probate fees. Your primary Will includes the assets in your estate that are subject to probate. Your secondary Will includes assets which are not subject to probate. Common assets included in a secondary Will are shares of a private corporation, art collections or jewelry. These are all assets that may have greatly appreciated in value but are not liquid. Therefore, avoiding probate can be greatly beneficial from a cash flow perspective.

Finally, but most importantly, your Will names the guardians of your minor or dependant children. Ensuring your children are in good hands should be enough of a reason to schedule an appointment with your lawyer today and begin the process of drafting your Will.

If you pass away without a Will, the courts will appoint a trustee to administer your estate. This court-appointed trustee will be responsible for making the key decisions discussed above. They will decide who the guardians of your children are and how your assets will be distributed to your beneficiaries. While this trustee has a fiduciary duty to act in good faith, they do not know your wishes. This process will also likely be more time-consuming which could create difficulties for your beneficiaries to access your assets to pay for items such as funeral costs. There will also be fewer assets available for your beneficiaries as this process is more costly due to probate and legal fees.

Your Will may need to be updated throughout your lifetime. It should be revised after key events such as marriage or divorce, birth or adoption of children, after the death of an executor or beneficiary or when your children no longer require guardians.

Many of the matters discussed above are personal decisions that need to be discussed with your loved ones. It is important that those closest to you understand your wishes and are prepared for the responsibility that they will assume when you pass. Beyond these personal matters, there are many additional financial and taxation considerations that are critical components of an effective estate plan.

For more information, please contact or 1 844-GYTD-CPA and Probate Planning
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