Estate planning is the process which involves determining what sort of legacy you either need to leave your dependants, or want to leave for others, even if they are not financially dependent upon you. Again, many people are under the mistaken assumption that estate planning is something you only need to consider if you are “rich” or “old”. In fact, every adult Canadian needs to have an estate plan in place, particularly those individuals with young children. Avoiding the subject is a selfish act. You will not be the person who will have to live with the consequences of your lack of planning – your family and friends will pay the price if your plan is not properly structured. Although there may be numerous components to your estate plan, it will be comprised primarily of:

• Your last will and testament;
• Any beneficiary designations you have made on registered investments and insurance products; and
• Any survivorship provisions on any jointly held property (for example, if you own your home in "joint tenancy" with your spouse, and your spouse survives you, they will inherit the home regardless of the terms of your will, except in the province of Quebec).

Many individuals do not understand how the various components of their estate plan operate. For example, some individuals add one of their children as a joint owner of their assets in order to save probate. However, they then assume that the asset will be divided equally between all of their children, since the terms of their will indicate that their estate is to be divided equally. Unfortunately, if only one child is a joint owner of the asset, the asset will belong to that child only (except in Quebec), and the terms of the will are irrelevant (although it is possible that the other children could sue the child who received the asset, resulting in messy litigation). Understanding how the various strategies work together is important to ensure your estate plan operates as you intended.

It is also important to understand how your estate will be taxed at the time of your death. Many individuals are aware of the fact that at the time of their death the provincial or territorial government will assess what is commonly referred to as a “probate fee” against their estate. However, most individuals do not understand that this probate fee is extremely small compared to the estate as a whole, and they mistakenly structure their estate with the sole purpose of saving probate fees. Unfortunately, if you do this, you may lose the opportunity to do income tax planning, which could result in much more significant savings. In many cases, your beneficiaries will be happy to pay the probate fees if that will result in substantial income tax savings.

Also do not assume that your estate plan will remain consistent throughout your life. Individuals in non-traditional family situations such as common-law couples and blended families need to be particularly diligent in structuring their affairs so that they do not unintentionally disinherit a common-law partner or a child. For many people, the estate plan is the most emotional part of their wealth plan, so be sure to communicate with your family about the manner in which you intend to distribute your estate. Once you have decided what your estate planning objectives are, contact us so we can determine which strategies will be most effective for you.