Estate planning is the process of arranging for the management and disposal of your assets after your death. In Canada, proper estate planning ensures your wishes are carried out, minimizes taxes, and reduces stress for your loved ones during a difficult time.
A Will is the cornerstone of any estate plan. Without a Will, your estate will be distributed according to provincial intestacy laws, which may not align with your wishes. Your Will should name an executor to manage your estate, specify how assets should be distributed, and name guardians for minor children if applicable.
Power of Attorney documents are essential for managing your affairs if you become incapacitated. A Power of Attorney for Property allows someone to manage your financial affairs, while a Power of Attorney for Personal Care covers healthcare decisions. These documents should be created while you're mentally capable.
Beneficiary designations on registered accounts (RRSPs, TFSAs, insurance policies) take precedence over your Will. It's important to keep these designations up to date and ensure they align with your overall estate plan. Failure to do so can lead to unintended consequences.
Probate is the legal process of validating your Will and granting authority to your executor. In some provinces, probate fees can be significant. Strategies to minimize probate include naming beneficiaries directly on accounts, using joint ownership (with caution), and setting up trusts.
Tax planning is crucial in estate planning. Upon death, you're deemed to have disposed of all your assets at fair market value, which can trigger capital gains taxes. RRSPs and RRIFs are fully taxable upon death unless left to a spouse or qualifying beneficiary. Proper planning can help minimize these tax consequences.
Business succession planning is important if you own a business. This involves planning for the transfer of ownership, ensuring business continuity, and addressing tax implications. A buy-sell agreement can help ensure a smooth transition.
Regular review and updates are essential. Major life events like marriage, divorce, birth of children, or significant changes in assets should trigger a review of your estate plan. Laws and tax rules change, so periodic reviews with your financial advisor and lawyer are recommended.