Planning your estate and mapping out what happens to your assets when you die is a complex process. For many people, it can be somewhat uncomfortable to think of planning ahead for a time when you are no longer around, however, there’s also quite a bit of information that everyone should know…as well as common pitfalls that you’ll want to avoid. Here a few important things you should be aware of before you start:
Be strategic
Part of the reason why estate planning can be so complex is because it’s important to be strategic when you plan, particularly when it comes to taxes and providing your heirs with the smallest tax burden possible.
When planning your estate, keep in mind that it is the responsibility of your estate to pay the taxes on things like capital gains and money you have stored in a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). It’s also the responsibility of your estate to pay for the costs of your funeral.
There are options available to help plan ahead in order to avoid subtracting these costs from your estate – and the amount that you will leave to your loved ones. Prepaying your funeral costs, for example, can help, as well as transferring money to your beneficiaries before you die.
Choosing an executor
In addition to being strategic and planning ahead, you’ll also need to make a decision about who you would like to appoint as the executor of your will. If you aren’t familiar with the term, a will executor is responsible for ensuring that your final wishes are carried out as defined in your last will and testament. This involves gathering up your assets, paying off any outstanding debts and then distributing the assets to your beneficiaries. It also involves other administrative type tasks like cancelling your credit and health cards and closing any accounts. For a closer look at the various tasks required, check out this executor duties checklist from RBC.
When choosing your executor, it’s important to choose wisely. Although being trusted as the executor of your will may be seen as an honour, it’s important to know that is often an extremely stressful and timely process. For this reason, some individuals actually choose to use an outside party who is not a beneficiary of the estate to fulfill this role rather than a loved one or close friend.
You may have to make changes
Congratulations! You’ve got your estate plan in place, and hopefully the peace of mind knowing that things are carefully thought out and there are no loose ends. Keep in mind, however, there may be good reason to add some minor modifications in the future. For instance, the dissolution of a marriage or even a falling out in the family may mean that your will needs to change in order to be both valid and accurately reflect your final wishes.
As you can see, estate planning is not always easy. At Ares Law, our team specializes in estate planning and helping our clients in Parry Sound, MacTeir and the larger Muskoka area deal with the intricacies of planning their estate. If it’s time for you to plan your estate or update your current will, give us a call today at (705) 746-6444.
