Wills and estate planning basics

Wills and Estate Planning Basics

Wills explained

A will is a formal document that describes how you want your assets distributed after your death?

A will is a formal document setting out how your money, property and other assets (your “estate”) are to be distributed when you die. You can change your will at any time before your death, as long as you have the mental capacity to know and understand the change.

If you die without a valid will, a court will appoint someone to administer your estate and distribute the assets according to a formula set out in provincial estate and family laws.

Your beneficiaries

Your beneficiaries are the people you name in your will to inherit your assets.

You can distribute your estate in 1 of 2 main ways:

  • By a specific bequest (“I give my daughter Joan Jones the sum of $10,000 and my diamond engagement ring”), or
  • By a share in the residue, which is the amount remaining in the estate after all bequests, debts, and taxes have been paid (“I leave my husband Bob Jones the residue of my estate”).

Your will can also provide other types of gifts by creating a trust in your will. This is known as a testamentary trust.

Having a valid, up-to-date will is essential to ensuring your estate is distributed as you intend it, and that your death does not create a legal and administrative burden to your family.

Estate planning explained

Estate planning is the process of arranging for an orderly transfer of your assets to the people you want to receive them.

Estate planning involves identifying who you want to give your assets to and when (during your lifetime, at death or sometime after death).

Your estate plan may also include:

  • ways to meet the financial needs of your family members if you die or become incapable of managing your affairs,
  • steps to minimize taxes that you or your estate might pay, and
  • a plan to sell or pass on your ownership stake in a business.

Documents commonly used in estate planning

A will is the cornerstone of an estate plan, but your plan may also include:

  • powers of attorney
  • living will
  • life insurance
  • trusts
  • business or partnership agreements if you own a business.

Communicating your estate plan?

Once you’ve created your estate plan, communicate it to your loved ones. This ensures they have the information they need to carry out your wishes.

Create an information package

Put together an information package that includes:

  • a copy of your will, powers of attorney, living will, and other estate documents – plus the location of the original signed copies,
  • a list of all your financial accounts, such as bank, investment and credit card accounts,
  • a list of all the benefits your family members may be entitled to, such as life insurance and pensions, and
  • a list and description of your debts (such as a mortgage, line of credit or loans) and your major assets (home, other real estate, investments and any collectibles such as art or jewelry that have substantial value).

Put together an information package and give copies to your executor, your spouse, adult children and anyone else who should know your estate plan.

Discuss your plan with your family

Take the time to ensure your family understands your wishes, why you’ve arranged things the way you have and any estate planning steps you’ve put in place to have your wishes carried out. A good opportunity to do this may be when you give them the information package.

Disputes can occur when family members are caught by surprise about estate plans or don’t understand the reasoning behind them.

When to review your estate plan?

Your life circumstances are bound to change over time, which could affect your estate plan. Think of estate planning as an ongoing process – not a one-time event.

Life events that can affect your estate plan

Not every change in your life will require a change to your estate plan, but consider reviewing it if any of these life changes occur:

  • marriage or common law partnership
  • birth or adoption of a child
  • separation or divorce – of you or a family member
  • death of a spouse, family member or executor
  • move to another province or out of country
  • major change in financial or business situation (such as an inheritance or bankruptcy).

Your wishes may change over time, even if no life events have occurred. It’s worth reviewing your estate plan every few years to confirm that it still reflects your wishes.