The Lifecycle of Estate Planning

People have different estate planning priorities and needs during the course of their life. Estate planning isn’t just planning for death; it’s also about planning for life.

Car driver womanYoung adults, especially those in their 20’s and 30’s often feel they don’t need a Will because “I don’t have anything”. Here’s the challenge: if you have a bank account, a credit card, a car … you do have an estate and need a Will with an appropriate executor named to deal with these assets in the event of your death. And since you’re at it, you may as well execute a power of attorney and advance health directive.

As adults become more secure financially they start purchasing. It could be a condo, a house or a cottage at the lake. The questions become slightly different. Is the mortgage life insured? What are your insurance needs for life, disability, property, etc. Is there adequate coverage?

These questions become even more pressing when entering a relationship, whether common-law or marriage. If the house was solely owned before the relationship, will it be re-registered joint with right of survivorship? Is there a marriage or cohabitation agreement in place? Does the Will, power of attorney and advance health directive need to be updated to reflect these changes? In all provinces except Alberta and British Columbia marriage revokes a Will. In Saskatchewan, cohabitation can revoke a Will. If there is no Will, some provinces don’t recognize a common-law partner as having rights under the laws of intestacy. Are appropriate beneficiary designations in place on insurance policies, pensions and RRSPs? Has a financial planner been engaged to help achieve personal financial goals?

Happy Children Enjoying Piggyback Ride On ParentsChildren? A new set of questions. Does the Will include a guardian appointment for the children? Are testamentary trusts established in case both parents die in a common accident? Has an RESP been set up to take advantage of available grants?

Has organ donation been discussed yet? It’s never too soon to discuss this very important topic and understand the other person’s wishes.

Relationship breakdown. Unfortunately, it happens. This should again spur a review of your estate plan. Many of the same questions that need to be answered when entering a relationship have to be answered when exiting one. Is there a property settlement? This may be an important factor in being able to update your Will.

You own your own business. Do you have plans in place in the event you are incapacitated or die? Who would run the company? Does the attorney named in your power of attorney or the executor named in your Will have the ability to continue the business? Is key man insurance in place? Who has signing authority on the accounts? Consider the impact on employees should these questions not be answered before illness or a tragedy strikes.

As we age, so do our parents. Do you know your parents’ end-of-life wishes? Do your parents have a Will with an appropriate executor? If they’ve pre-planned or pre-paid their funeral, do you have the details? Is it time to think about pre-planning or pre-paying your own funeral, or at least discussing it with your own family?

Nurse Making Notes During Home Visit With Senior CoupleThe children leave home (hopefully) and start their own lives. Retirement is approaching. What is the most appropriate way to distribute your estate? Will it be shared amongst your children, grandchildren or a favourite charity? If you have a child with disabilities, is an absolute discretion trust appropriate? If leaving money to charity, what is the most tax-effective way to do so? Does it make sense to open an RESP for the grandchildren? If a child predeceases you, will their children benefit? Has money been lent to a beneficiary? If so, will that money form part of the estate or will the loan be forgiven?

Life has a cycle and evolves. So too does estate planning. It’s always a good time to establish your priorities, look at your current and future needs, and evaluate your estate plan.

Joan McAulay, Senior Personal Trust Specialist, Trust Relationship Management & Sales
Concentra Trust, A wholly-owned subsidiary of Concentra Bank

Executors: What You Need to Know about Probate

Probate[1]. What is it? When is it required? Why is it required? In this post, we’ll discuss probate and its role in the estate administration process.

What is it?
Merriam-Webster defines probate as “the action or process of proving before a competent judicial authority that … the last will and testament of a deceased person is genuine”.

More simply put, probate is a court grant that ratifies the appointment of the nominated executor and acknowledges under the court’s seal that the Will has been properly executed and proved before the court that it is the deceased’s ‘last Will’.

When is it required?
Not all estates require that the Will be probated. But there are a multitude of reasons why it would be requested. Although not a comprehensive list, here are a few of the instances where probate could be required:

  • Real property is solely owned or as tenants in common by the deceased.
  • A transfer agent requires probate to deal with shares held in a publicly traded company.
  • A financial institution requests probate in order to release funds held on deposit.
  • A testamentary trust is established under the Will.
  • There are beneficiaries under the age of majority.
  • The executor has pre-deceased or renounces and no alternate executor is named.

Why is it required?
Obtaining probate is a process that protects the executor in the event a newer Will is found. If probate is not obtained and the assets distributed and a newer Will is later discovered with a different distribution scheme, the executor could be liable.

Financial institutions establish policy for determining whether probate is required to release the funds held at their organization. It is often based on how the account is registered and the value of the asset. As with the executor, probate mitigates the financial institution’s risk when releasing funds.

Applying for Probate
Each province has prescribed forms that must be completed to exact standards with respect to details about the deceased and the beneficiaries. In most provinces an inventory of the deceased’s assets and liabilities establishing the value of the estate is required. The original Will accompanies the application to the court along with the required probate fee[2]. Once granted, probate legally authorizes the executor to proceed with administration of the estate.

The Myths
One myth surrounding probate is that probate fees are charged on the entire estate. Probate fees are only charged on assets that will be distributed through the Will. Assets that are considered non-probatable, and therefore not subject to probate fees, include life insurance policies, pension plans and registered plans where a beneficiary other than the estate has been designated.

Another myth surrounding probate fees is that they are excessively high. Admittedly, there are provinces that do have probate fees higher than others, but the fees range from 0.4% (even lower in Alberta) to around 1.7 %. On a $1,000,000 estate the highest probate fee payable in Canada would be approximately $17,000.

It is always prudent to reduce the probate fees the estate will pay through proper estate planning; however, there are times when the cost of avoiding probate may be higher than the probate fees incurred at the time the estate is administered. Discussing options with an estate professional should be done before implementing any strategies to reduce probate fees.

[1] Certificate of Appointment of Estate Trustee (Ontario)
[2] Estate administration tax (Ontario)