1. Get over yourself!
Many people have an aversion to estate planning due to their own mortality.
Get over it! We all die, that is a certainty. Planning your estate to minimize tax, and gifting assets to your beneficiaries in a responsible way, are not tasks you should avoid. I can assure you that starting your plan now will not hasten your death.
2. Shorten your planning horizon
Most of us don’t know when or how we will die. As a result, attempting to create a comprehensive estate plan that works from the date of signing, right up to the unknown date of your death is destined for failure. For example, who should be the Executor of your estate? Your mom or dad? Will they be around at the date of your death? Should it be your kids instead? What if they are too young right now? Will they be ready in 10 years? – there are simply too many variables if you are attempting to make a “this is my Will, once and for all” kind of a plan.
I recommend shortening your planning horizon. Start from the viewpoint that if something drastic happened today the plan has to be able to work NOW. Choose people you know to be right for the job right now and likely for the next 5 years only. We can change the plan over time as circumstances warrant. Most of these such changes are very easy and little cost or effort to complete.
3. Inventory your Assets and Debts
This step serves 2 important purposes. First, having a current list of assets and debts, including account numbers, addresses of institutions and important contact persons - is a tremendous help to your Executor. You know all about your assets and debts, but the person named as the Executor in your Will probably doesn’t. If a sudden and tragic event were to lead to your death, your Executor is forced to provide this information to complete your probate. The longer it takes for them to compile an inventory of your assets and debts and to determine the taxes due at your death, the longer it will take to get your administration done (and release funds to your family).
Second, debts and taxes are important factors to consider in determining the net value of assets that are available to pass on to your beneficiaries. When you die, your entire estate is deemed sold. Unrealized capital gains and income taxes become due. For example, your RRSP’s are deemed to be cashed in. It will be as if you have earned all that money in the final year of your death. So, if you have worked diligently to put away a nice nest egg, the government is coming for a substantial part of that BEFORE gifts are passed on to your children or grandchildren. Knowing what that means in your estate is critical to the planning process and will open up some planning opportunities.
4. Talk to people who will be role players
Many people choose their Executor relying solely on family relationships and birth order: they choose their spouse first, failing that then the eldest child, failing that the second eldest child, and so on. The problem with this standardized planning is that the persons selected may not be best suited for the job. I have even seen instances where the persons selected do not want the job!
Foisting the administration of your estate on someone is not a decision that should be made without talking to the person you have in mind. You certainly wouldn’t do that with the proposed Guardian of your children, so why then is it any different for the Executor of your estate? It isn’t. Talk to the people you propose to appoint as your Executors to determine if they are willing and able to take on the task. Keep in mind there are a number of options available: we can combine people with special skills to work as a team; we can set them up with pre-determined advisors; or we can give them hard and fast rules that they can rely on rather than be left to exercise their own discretion in things like when and how much money to give to a (often demanding) beneficiary.
5. Get Started!
Most importantly GET STARTED! Look on the internet for information that may be of assistance. Marshal your thoughts on topics such as guardianship, trust funds for minors, instructions for health care and termination of life support. Talk to your spouse about potentially unknown facts that you would want if you passed away suddenly. Look to other articles and checklists on my website that are available for your use… all these actions are extremely helpful. Then call me to book your complimentary appointment and we can assist you in completing this task. Once it is done, you will have peace of mind… I guarantee it!
Rolland C. Lequier, Barrister & Solicitor at Elite Counsel