Creating Your Estate Plan

Previously we determined that everyone needs to protect their assets and have an orderly distribution to beneficiaries.  Spend some time creating your estate plan before taking it to the lawyer who will draw up your will.

Determine the Size of Your Estate

Look at what you own and what you owe.  You need to know what you have and much it is worth now.  This will determine the estate planning and tax strategies you use.

List your assets (everything you own) and the current market value.  Don’t forget retirement benefits and insurance proceeds.  How are the titles held (e.g. joint with right of survivorship)?  Who are the beneficiaries of your insurance policies, RRSP’s and other benefits?

List your liabilities, if any.  Calculate your net worth and the taxable value.

Decide What You Want

Be specific.  Provide for your spouse and children.  Who will inherit your share of a small business?  You may want to set aside money for education or medical expenses, supplement your children’s income or finance a home or business for them.  List any other beneficiaries you want to leave something to.  It’s up to you.

Plan for some liquidity to make sure there is some cash readily available to pay for expenses such as funeral costs and appraisal fees.

Get it Done

Find a lawyer who specializes in estate planning to advise you and draft the appropriate documents.

When to Revise your Estate Plan

Review it periodically.  Changes in personal circumstances might cause you to alter your estate plan – marriage, divorce, birth or adoption of children or grandchildren, move to another province, changes in family relationships, educational needs, maturity of family members, death of spouse or another heir, serious illness or accident.

Also significant changes in financial status can affect you previous decisions – change in employment, receipt of a substantial sum of money such as a gift, inheritance or lottery win, sale of property or change in property value.

What is a Codicil?

To change a will you can have your lawyer rewrite it.  If you want to revoke any old clauses or add new clauses to your will (minor changes), you can do so by adding an amendment, or codicil, rather than redoing the entire will.  A codicil must be executed and validated just like a will.

The next part in this estate planning series will discuss some ways to reduce income taxes on the final tax return.

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  1. SavingMentor on September 15, 2011 at 6:06 am

    Creating an estate plan seems like a very daunting task to me, but it is something that I need to tackle this year in my life. Seems like finance bloggers are talking a lot about it these days too so it’s a real kick in the pants to get moving on it!

  2. The Wealthy Canadian on September 17, 2011 at 6:17 pm

    Great job with a continuation of the estate planning process.

    I totally agree in that once you have a Will or more comprehensive estate plan in place, it is important review your documents periodically.

    Locking your Will and pertinent documents in a safety deposit box for eternity is not the greatest idea, especially if there are events that have changed over the past many years.

    Whether it’s starting a family with kids, divorce, or other personal events that have materialized, your priorities in terms of how you wish to have your assets managed upon death may change over time. Being prepared for these changes is important IMO.

    Nice post!

  3. IVA Help on September 20, 2011 at 9:28 am

    Creating an estate plan does seem a daunting task, but it is something that you really need to look at as soon as possible to protect your assets and have an orderly distribution to your family and friends.

    On the whole, it’s best to have the documents ready and up to date asap.

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