The purpose of estate planning is to
meet your beneficiaries’ needs after your death, according to your
wishes. A proper estate plan can:
- arrange your affairs in an orderly manner to minimize the burden
on your family;
- ensure your assets pass to the heirs of your choice;
- ensure quick, easy administration of your estate;
- reduce income tax payable after your death and adequately fund
their payment;
- provide for management of property for minors or those who lack
the skill or ability to do so themselves; and,
- provide for guardianship of minor children.
The key issue to address is the implication of the ownership
of assets at the time of your death. You should consider your
intended beneficiaries, how your assets are transferred on death and
any income taxes or probate fees. Estate planning can respond to
these considerations.
Estate planning, at its most basic, revolves around your
Will. The Will states who will be entrusted with administrating your
estate and how you wish to distribute your assets upon death. Basic
estate planning also involves preparing a financial and personal
Power of Attorney — someone to manage your affairs in case of your
subsequent incapacity. For personal matters, particularly medical
treatment, this is often called a Living Will.
Some strategies can take effect during your lifetime. Powers
of attorney, trusts, estate freezes and gifting may be part of
lifetime planning. Life insurance may also play a key part.
Every family has individual needs. An estate plan can capture
and document a set of measures that will work best to address them.
Review your Will at least every three years or when there is
a major change to your personal situation.
Consider the following:
- Marriage will revoke an outstanding Will. If you marry and
then die before drawing up a new Will, you will be treated as
dying without a Will and be subject to the provincial laws on
intestacy.
- Divorce does not revoke your Will. Once a final decree is
received, the divorced spouse will be treated as having
predeceased you and will automatically be struck out of your
Will.
- Separation may have no effect on a Will. If you die without
changing your Will or preparing a separation agreement, the
terms of your Will prevail, and your spouse may benefit from
your estate. You should draft a new Will upon separation.
- Common-law relationships may or may not affect the terms of
your Will. Provincial legislation may dictate the impact of your
common law status.
Joan McCarthy is a
financial consultant with MD Management’s Newfoundland and Labrador
regional office. |
