Estate Planning Basics

How to create an estate plan and make things easier on your family.

No one ever likes to talk about death, but today we’re doing it. It’s not exactly a subject that comes up at the family dinner table very often, but it is a conversation that you need to have with your loved ones, just in case a tragic event strikes. It is always better to be overly prepared than be forced into a situation where you have to make life or death decisions with no background information.

When you’re young (and you know, invincible) the last thing on your mind is what would happen to your assets if you passed away. This is especially true when you may not have much in the way of assets, but that doesn’t mean it’s not important to plan for the future. You don’t necessarily have to get your full estate plan in place if you don’t have much in the way of assets and no children to make decisions for but there are some advantages of getting a head start. The one biggie is life insurance. The younger you are the cheaper your life insurance premiums will be. Learning about estate planning can also help you if you have ageing parents who might need a little nudge to get their affairs in order. If you already have your own children, you definitely need to start the process and get an estate plan in place.

So what exactly is an estate plan and what do you need to get done to ensure you have a functioning one in place?

The Will

This is the big one, and you want (need) to make sure it is done properly. Sure you can buy a ‘Write your own Will’ kit off the internet but just don’t ok? I really recommend having a lawyer take care of this for you, no matter how simple you think it might be. The last thing you want is for your family to be arguing over non-specific language in your will after you’re gone, and this happens more often than you would think. No matter how close you think your children may be, conflicts over an estate happen, and the one way you can control things from the grave (ok, that’s a little creepy) is by having a clear and concise Will. Yes, it’s going to cost you to have a lawyer prepare your Will, but I promise you it is worth it in the long run. Your Will is where you are going to indicate who gets what of your assets (investments, property, and possessions) and also where you will appoint a guardian to any underage children. Have these conversations before you meet with a lawyer and make sure that people who are getting assigned a job are informed. Sure, that scene it ‘Manchester by the Sea’ where Casey Affleck finds out his brother chose him to take care of his son might have been funny in a dark and painful sort of way but that’s a movie…not real life. Most estate lawyers will provide you with a questionnaire or worksheet to help you plan all things out before you actually meet.

Enduring Power of Attorney

It makes sense to get a Power of Attorney done while you are getting your Will done. An enduring POA will allow you to choose someone to make decisions about your finances and your property when you are no longer able to make such decisions yourself. Don’t worry about hurting anyone’s feelings here; you don’t have to choose someone just because they are family. This is not an easy job for anyone (and it could potentially be long-term), so you are looking for someone who can function under stress and make the decisions you would make if you were able.

Personal Directive (Living Will)

A personal directive is similar to a POA in that it gives someone the decision making power when you are no longer able, but the PD covers decisions regarding your health and personal well-being. This includes such things as medical treatment, where and how you will live, and what happens to your children. Often it makes sense to choose the same person for your POA and PD, but it doesn’t have to be. You know your people so do what makes the most sense for your situation, and remember, you can always change your mind in the future.

Life Insurance

You will want to ensure your debts are covered and your loved ones can continue to live comfortably if you die suddenly and life insurance can be a major factor in accomplishing that. If you all your debts are paid up, and you already have enough assets saved up to ensure any potential beneficiaries are taken care of then insurance isn’t as necessary. However, if that’s not the case, then it becomes almost an essential. I would look at getting a term insurance policy for an amount that will cover the cost of any outstanding debts (mortgage, loans, credit cards, etc.), the cost of your funeral, and enough additional money for your spouse to live on and raise any children you may have. Slight side note here…when you are getting a mortgage your bank will try to sell you mortgage insurance; don’t do it. It’s actually kind of a scam, and I’ve talked about it more here. Term life insurance is the way to go.

Ok, those are the big important documents that you want to make sure you have in place. Now I’m going to include a few extra tips that aren’t exactly estate planning per se but will make things easier for your loved ones.

Make sure your spouse is listed as an account holder on any accounts/policies you have, or is at least given permission to make decisions; for example, your spouse should be listed on your utility, phone, and cable bills to make any necessary changes if you’re not around. If you don’t have authorization on an account and your spouse has passed away you may have to jump through some ridiculous hoops to get answers and make any changes to the account.

Keep a file with copies of your relevant documents (all of those we talked about above as well as bank and investment statements) and tell your loved ones where that is so it’s easy for them to find. If you are the executor of an estate, it can be a real task trying to hunt down where the deceased had money. I like to keep things simple myself but that’s not always the case, some people are all about not keeping all their eggs in one basket and have bank accounts and/or investment accounts at numerous different institutions.

Make sure the beneficiaries listed in your will match up with the beneficiaries you have listed on your insurance and investment accounts to avoid any confusion and keep those beneficiaries updated! There are rules in place for this (life insurance trumps Will but Will trumps investment accounts), but it’s an easy change to make and helps avoid any conflict. Imagine how you might feel if you think you’re the listed beneficiary on a large RRSP account only to find out the Will specifies otherwise…

If you are lucky enough to have a pension, make sure you (and your spouse) know your pension options. When you are retiring, you will be most likely be given different options on how and when your pension is paid out which can include how much your spouse would receive in the event of your death and potential guarantees for set terms. You might get a higher monthly amount if you choose an option where your spouse gets a reduced pension with no guarantee after your death but that might not make sense in the long run. Taking the slightly smaller pension now could save your spouse from suffering money troubles in the future.

So much of our lives are online now that it can be helpful to have a record of usernames/passwords that can be accessed to shut down online services. I’m sure if you take a look through your credit card statement you likely have a few online services that you are paying for (Netflix, Spotify, etc.) and those would all need to be cancelled. There are also things like email accounts, online banking, and social media accounts that may need to be accessed for monitoring or to shut them down.

If you have pets, you’ll want to make sure you have someone who is willing to take care of them. You can even set aside a portion of your assets to whoever gets the job to make sure your furry friends are given all the spoiling they deserve.

Do you want to be an organ donor? If so you’ll want to make sure you’ve discussed this with your family, so they have a heads up. Then you can sign the back of your Alberta Health Care Card (if you live here), register online, or register the next time you get your driver’s license renewed at a registry.

There you have it. Hopefully, you’re now ready to get your estate plan in place and make sure your loved ones do the same thing. As always, feel free to post any questions down below.

This post was proofread by Grammarly.

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