The month of October marks a few traditions for Canadians. Many look forward to the positive ambiance of the thanksgiving dinner table, or the enjoyably spooky atmosphere of Halloween night. However, what many Canadians might not be aware of is October also marks another important tradition for Financial Planners & Canadians alike, it is of course Estate Planning Awareness month.
And unlike the ghosts, ghouls and supernatural creatures of Halloween, Canadians need not be afraid of estate planning.
In this article, we’ll cover Tim Cestnick’s adaptation of Sandra Foster’s Estate Planning Workbook, outlined in his Globe and Mail article on the Five D’s of Estate Planning.
1. Define
Defining what’s most important to you is an imperative starting place for your estate plan as it helps identify your core values. These values should be your guiding star in determining the legacy you want to leave behind. It’s important to YOUR core values as opposed to your children or others, as only your values should dictate your estate planning considerations. For example, if generosity is a core value, perhaps you can include some charitable donations to your desired charity in the event of your passing. Once you’ve defined your core values, you then must define who in your life will receive your assets, as well as how much, and when.
2. Design
This leads naturally to the second step in the process, which is to design strategies to aid in your estate transfer. This step starts with outlining your objectives, which should be consistent with your core values. For example, a core value can be maintaining inter-generational wealth, and an objective that can aid this would be minimizing estate tax at the time of death. You may need to prioritize objectives during this step, as it is possible for objectives to conflict. It is important to speak with our team during this step to ensure you are aware of all the tools at your disposal to achieve your estate’s objectives.
3. Document
This step is important for a multitude of reasons. It will give you complete clarity around what happens to your estate when you die. Importantly, it also increases the likelihood of your wishes being carried out to your liking. Proper documentation leaves nothing to interpretation and will allow you to avoid the government dictating what happens to your assets upon death. Documentation will also make life a lot easier for your executor and heirs who might have no idea what you own, where it’s located and your wishes.
Three types of documents suggested are a last will & testament, your powers of attorney and other relevant information, such as any personal information (legal name, address, place of birth etc..), family & professional contacts, or even digital log-in information.
Our Estate Directory is the ideal centralized document to capture this information, as it will store and organize everything your executor will need into one document. Similarly, our Digital Estate Planning Guide will ensure your executor will be able to access all of your digital assets, such as personal electronic devices, emails, banking accounts and more.
4. Discuss
Many parents finish their estate planning with the creation of a Will; however they may shy away when it comes to discussing it with their heirs. On one hand, these can lead to some uncomfortable conversation amongst parents & children, but the importance of doing so nonetheless cannot be understated. Speaking to your heirs about your planning can avoid confusion, hard feelings down the line, or even more serious issues such as psychological damage and inter-familial legal battles.
When discussing your wishes, Cestnick offers a few guidelines to a successful conversation: find the right time to speak with them, be on the same page as your spouse, decide what you’ll share, and explain your guiding principles that influenced your decision.
5. Distribute
When it comes to distributing assets to your heirs, there are a few choices: either gift assets during your lifetime or upon death, or even do a bit of both. Understandably, there are many considerations with either option. If you elect to gift assets in your lifetime, it is important you understand how much you’ll need to set aside for yourself to live comfortably. You will also want to inform your heirs if any pre-estate gifting strategies are an advancement on their inheritance so there are no surprises.
If you (like most) plan on passing your assets after you are gone, Cestnick lists six ways this can happen:
- Through intestacy laws (default approach if you do not have a Will)
- By naming beneficiaries on assets
- Through joint-ownership of assets
- By a partnership or shareholder agreement.
- Through trusts
- By your will
When distributing your estate, it is important to have a financial planner in your corner to ensure your estate is passed on as efficiently as possible.
Plan ahead with an advisor at your side
In conclusion, these “Five D’s of Estate Planning” offer a great step-by-step process for achieving your desired estate planning outcomes. In this month of Estate Planning Awareness, we remind you to re-visit your plan with a Financial Professional to ensure your wishes are congruent with your current plan.
Reach out to our team today to organize your estate documents with our Estate Directory & Digital Estate Planning Guide!