Accepting the truth of our mortality is never easy, but it must be faced and even planned for much in advance. What happens to your carefully built business once you’re gone? Who will look after the interests of your loved ones when you are no longer around to care for them? All these questions need to be answered during your lifetime through proper estate planning and appropriate documentation.

Key Documents Every Person Must Have for Smooth Estate Planning

Before you start the documentation, it’s a good idea to make a comprehensive list of your assets (both personal and professional), decide who your beneficiaries will be, and identify the people who you trust to manage the process. Remember, these people will be entrusted with caring for all your life’s belongings and loved ones, so choose wisely.

Having collected your thoughts and other relevant data, the next step is to consult a lawyer and a financial advisor specializing in estate planning. They will then draw up the required documents to make sure your estate planning procedure is done lawfully and smoothly.

Necessary documents include a Power of Attorney for Property, Power of Attorney for Personal Care, and a Will. A letter of instruction can be a helpful addition, and in certain circumstances, setting up a trust can be beneficial.

Power of Attorney for Property

A Power of Attorney for Property is a document that gives a person of your choice the authority to manage any financial, legal, or property-related transactions on your behalf should you be alive but unable to manage your own affairs. Using this document, that person can pay bills, manage your bank transactions, and make decisions regarding your investments and other property.  The person chosen does not need to be a lawyer; it can be your spouse, family member, or close friend.

Power of attorney must be granted while you are of sound mind and capable of making your own decisions. Individuals with Alzheimer’s or other types of dementia are not eligible to appoint a power of attorney; the decision must be made before the condition impairs their decision-making capacity. Granting such power to a trusted person in advance can make things easier for you and for those caring for you in the event of sudden hospitalization, physical injury, or mental decline.

Power of Attorney for Personal Care

This document, sometimes referred to as a living will,  is a power of attorney for medical purposes. It grants the chosen person authority to make any medical decisions on your behalf while you are alive.

In the case of an unfortunate accident or illness that renders you incapacitated, the person you choose, whether that be your spouse, family member, or close friend, is legally authorized to make decisions related to your treatment. To what extent that person can make such decisions can be specified while drawing up the  document itself. For instance, can they only decide what line of treatment should be used, or can they also make significant decisions in case a cure isn’t possible?

These are tough decisions. By appointing a power of attorney for personal care, you can ensure that the person making these choices is the person you think will make the best decision on your behalf.

Will

The importance of making a will cannot be underlined enough. Bitter legal battles over property disputes have torn apart many families, friendships, and businesses because of the absence of a will.

A will – or in technical terms, the “last will and testament” – is a document where you legally specify what to do with your property and assets after your death. In the will, you can:

• Specify what share of your property will go to which person or who will take over your business.
• Assign the guardianship of your minor kids or pets to the people you most trust.
• Bequeath items of high emotional value or financial gifts to specific beneficiaries.
• Designate your trustee(s)/executor(s) to ensure all the terms of your will are complied with adequately after you are gone.

Make sure you put a lot of thought and detail into writing a will to avoid any confusion or conflict in the future. Keep updating the will whenever a life event – marriage, child, divorce, death of a family member – happens, specifying the date.

Getting professional advice when drafting your will is important. While there is no inheritance tax in Canada, income tax can be triggered in the estate when assets are transferred to beneficiaries. Your McCay Duff LLP consultant can help you arrange your affairs to reduce your estate’s tax burden.

Your lawyer will draft your will and other documents in accordance with your wishes, reducing the chances of disagreement over assets.

Letter of Instruction

A letter of instruction is an informal document similar to a will. It contains vital information including details of insurance policies, the location of any financial documents, contact details for important people who can help with various responsibilities or problems, passwords to social media sites, instructions to manage digital data, and more.

You can give explicit instructions on matters pertaining to your after-death procedures, such as preference for burial or cremation, funerary arrangements, and memorial services. While it may seem morbid, such a letter of instruction can guide your family when they are too emotionally distraught to think of all such things.

Trust

Apart from a will, a trust can be an effective way of passing on your assets and property to your heirs. A trust can be set up during your lifetime or as part of your will. This structure is especially beneficial for minors, beneficiaries with a disability, or heirs with complex familial relationships.

Benefits of a properly structured trust can include asset protection, providing for beneficiaries who are incapable of managing their own affairs, avoiding probate fees, and privacy. Unlike a will, a trust document does not become a public record. On the other hand, a trust requires legal fees to set up, and a separate T3 tax return will likely need to be filed annually. Recent changes to trust legislation have made the T3 filing process more intensive by requiring onerous disclosure schedules to be attached to the return. Your McCay Duff consultant can help you determine whether a trust makes sense in your circumstances.

Estate planning is an ongoing process that requires reviewing and updating documents whenever circumstances change. Perhaps the executors you named in the will can no longer execute their duties. Or your assets could have grown or changed over the years. Or maybe the beneficiaries have changed. Your life changes should be reflected in your estate planning for a smooth transfer of wealth and legacy to your family.

Contact McCay Duff LLP in Ottawa for Expert Estate Planning Advice

A skilled estate planner can help you plan your estate transfer most tax-efficiently. At McCay Duff LLP, our tax experts can provide services to support your tax and estate planning needs.  To learn more about how McCay Duff LLP can provide you with estate planning expertise, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.