Estate planning basics

Before you meet with a lawyer to have your Wills, Powers of Attorney and any other relevant estate documents prepared, you should collect all the necessary information that you and your lawyer will need. These details can be broken down into the following categories:

Your personal situation

This category includes information on the who, what and where of your life, including any potentially complicating circumstances. Some important details include:

• Place of birth, citizenship and residency
• Marital status, and any related documents (e.g., domestic contract, separation agreement, etc.)
• Occupation
• Any health concerns that may need to be addressed in your estate plan
• Any other possible complications (e.g., an ongoing lawsuit or a potential claim against your estate)

It is important that you provide a full account of these details since they might play a significant role in your estate plan.

Your financial and asset information

This category of your information should include an inventory of assets. This will obviously include financial assets, such as investments and real estate, but it should also include digital assets. Digital assets may have financial or purely sentimental value, and could include items such as photographs, a popular domain name or digital currencies. Information on accessing assets, including account numbers for financial accounts, addresses for properties and passwords for digital assets, should all be noted.

Your asset inventory should include information on the acquisition costs of each asset, plus any improvements or additions since then. An estimate of the current fair market value should also be included, along with information on how the asset is held (i.e. directly or via a corporation or trust).

It is often considered best practice to note any conditions or restrictions regarding your use, ownership and ability to transfer any asset. For example, you could be prevented from leaving your shares of your family’s business to your spouse as a result of a Shareholder’s Agreement which specifies that your siblings have the right to buy your shares from your estate. Another factor which may restrict your ability to transfer an asset would be different modes of ownership, such as joint tenancy or tenancy-in-common. For example, you may want to leave your kids your interest in the property, however, since that interest is a joint tenancy, your interest would actually go to the co-owner of the property by right of survivorship at your death.

You should also note if any assets are considered cultural property or ecologically sensitive land under Canada Revenue Agency (CRA) guidelines, as this may present tax planning opportunities if you are considering gifting those assets. If you are not able to ascertain these details for yourself, your lawyer will be able to assist you.

It is similarly important to note any liabilities you may have, including the terms regarding security and repayment. This includes money that you owe, and the details of any money owed to you, including whether you would like the debt(s) to be forgiven or collected at your death.

Once you have a comprehensive inventory of assets with market values and cost bases, you’ll be able to get a sense of your tax liability upon death. This tax liability could stem from triggering unrealized capital gains at death and the inclusion of any registered retirement income that is not rolled over to an eligible recipient. Depending on your province of residence, probate fees may also be an additional tax to consider.

Having a detailed inventory of assets, liabilities and estimated taxes upon death allows for a better understanding of estate liquidity and if any additional planning strategies are needed. It also streamlines the document drafting process and can save time for your lawyer and executor.

Your intended beneficiaries

You should include full biographical details for the people you would like to benefit through your estate plan. These details may include their full legal name, their date of birth, their citizenship, their residency and place of birth, their relationship to you and their contact information.

Your task at this stage of the estate planning process is to consider your wishes and intentions for your estate plan. Firstly, consider what legal and moral obligations you have that must be fulfilled through your estate plan. Next, consider other priorities you would like fulfilled, such as tax minimization, asset protection, charitable giving or simply providing for loved ones and distributing assets on a timely basis.

Consider too any family members or loved ones that may be dependent on you and may require ongoing financial support. In the case of blended families, you will likely have additional considerations when determining how to provide for your spouse, as well as your own children and/or stepchildren. If you own a business, you will need to consider how it will either be wound up or passed onto a new owner.

You should also consider your charitable intentions in this section of the estate planning process. You may have charitable wishes that you would like to accomplish through your estate plan but are unaware of the options to facilitate your charitable giving legacy. These options can include a bequest in your Will, naming a charity as owner and/or beneficiary of a life insurance policy or designating a charity as beneficiary of a registered plan such as a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Tax-Free Savings Account (TFSA) or pension. Alternatively, you may want to consider structuring your charitable gift though a donor advised fund to enable flexibility and stability for your planned gift. It is important to work with your planning professionals to develop a tax efficient charitable plan that meets your current lifestyle needs and charitable objectives.

Finally, consider who would be most appropriate to be named your executor(s). When you are considering whom you would like to fulfill each role, consider their location, age, experience and ability to devote time to it. You should also take the opportunity to confirm that these people are willing to act in the roles you have in mind for them, and you may also wish to discuss their expectations regarding compensation for carrying them out.

If there are complexities in your estate or you do not wish to put the burden of responsibility on the shoulders of your loved ones, you may wish to consider whether a professional would be better able to undertake these duties.

You may consider naming a Trust Company, for example, which means experienced Trust Officers would professionally manage the administration of your estate. It is important that you speak with a representative from any organization you’re considering in order to get a sense of the service they provide.

Once you have gathered the necessary information and thoroughly considered your obligations and goals, the next step in the estate planning process is to find a Will and Estate lawyer to help you implement your estate plan. If you are naming a Trust Company as your executor, they can often help you find qualified lawyers who provide these services. The Law Society of your province or territory may also be able to refer you to a qualified Will and Estate lawyer in your area, and your investment and financial advisors may have suggestions as well. You may also wish to consult with a lawyer who holds the Trust and Estate Practitioner (TEP) designation granted by the Society of Trust and Estate Practitioners (STEP).

Recommendations from friends and family members can also be helpful, but be sure to confirm that the lawyer being recommended is a specialist in estate planning or offers estate planning as a primary service within their practice.

Once you have engaged an estate lawyer, they will work with you to ensure that they understand you, your financial information, your beneficiaries and any complications that might arise in your estate or during a potential incapacity. Your advisor may be able to assist in collecting and organizing some of your information, including beneficiary designations they have on file. This information is crucial for your estate planning lawyer, and it will prove helpful for them that you have gathered this information in advance.

Your lawyer will then be able to work on your personalized estate plan, which may include drafting new or revised Wills, Powers of Attorney, and/or trusts.

After these documents are prepared and executed, it is important that you follow your lawyer’s advice regarding the safe storage of these documents.

Your information, your beneficiaries’ information and your obligations, priorities and goals may change throughout your life, so be sure to revisit your plan often and make revisions that reflect any new circumstances.

It is similarly advisable to review your estate documents every three to five years, or as circumstances in the lives of you, your beneficiaries or your executor necessitate a review. Such circumstances may include a change in marital status, a move to a different country or province, the birth or death of a family member or the illness or disability of an executor or beneficiary. Changes to existing federal and provincial laws may also necessitate a review.

It is prudent to discuss any of these changes with your Will and estate lawyer to determine whether an update is necessitated in your estate plan documents. Oftentimes, lawyers will build contingencies into your estate plan to cover some of these situations, but it is a good idea to let your lawyer know in any case so they may note them down in their file — even if a change to your estate plan documents is not required at this time.

Estate planning is an ongoing, multi-step process which takes into account your unique personal and financial circumstances as well as those of your intended beneficiaries. While it can be a daunting undertaking, it doesn’t have to be. With the help of qualified Will and estate professionals, it is never too soon or too late to be engaged in developing, implementing and updating a plan that can satisfy your estate planning objectives.

Speak with an advisor to help outline your goals and determine if further planning is required to ensure all steps in the estate planning process are updated and aligned with your situation and objectives.