What is estate planning?

Estate planning is the act of preparing for the transfer of your property upon  death. That property (called an “estate”) can include money, life insurance, pensions, real estate, automobiles, personal belongings, and even debt owing to you.

Estate planning also includes making arrangements so that financial and medical decisions can be made for you when you cannot make those decisions for yourself. For example, if you are unable to manage your affairs due to an accident or an illness, an estate plan can set out who is to make those decisions for you.

The words “estate planning,” “financial planning,” and “retirement planning” often refer to the same thing.

The subject of estate planning may make you want to shudder, but the fact is that we at Kahn Zack Ehrlich Lithwick LLP aim to be good listeners; simplify the procedure, and work with you to ensure that your wishes are documented and honoured.

What does an estate plan include?

An estate plan includes two components – a legal component and a non-legal component.

The legal component includes retaining a lawyer to review your personal and financial circumstances and to have documents executed to ensure that your wishes are carried out. These documents include a will; an enduring power of attorney (which deals with financial decisions); a representation agreement (which deals with health decisions); and trusts like an alter-ego trust, joint spousal trust, and family trust.

The non-legal component includes reviewing all your financial resources and planning an investment strategy with specialists to ensure that you can live comfortably in retirement.

Why do I need an estate plan?

Having an estate plan will give you peace of mind. Not only will you be satisfied that you have sufficient financial resources in place for your retirement, but also you will know that your wishes with respect to the distribution of property after your death are fully taken care of. In addition, you will have a plan in place where others can make decisions relating to financial or health matters when you are prevented from doing so by reason of either mental or physical disability.

Good estate planning will also include consideration of minimizing taxes payable to Canada Revenue Agency, administrative costs, and probate fees. You can avoid challenges in court when documents are prepared by those who do not have the requisite expertise and experience.

Further, if you do not have a power of attorney, it will be necessary to make an expensive court application pursuant to the provisions of the British Columbia Patients Property Act and have a committee appointed to make financial decisions for you in the event that you cannot make these decisions for yourself if you become physically or mentally incapable.

For example, an ambiguous will may give a disgruntled family member the right to challenge it.

Estate planning is not just for the wealthy; it is for everybody. The key is to plan for tomorrow today so that you can retain more of your assets and leave a lasting legacy for your family and designated beneficiaries.

Estate planning also includes the registration of assets in joint ownership so that upon your death, the survivor immediately becomes the owner; the purchase of life, critical illness, and long-term care insurance; and tax planning, business, and succession planning.

What is the first step in estate planning?

The first step is to meet with us. We have many lawyers with necessary estate planning skills to assist and advise you.

What steps are involved in the estate planning process?

When we meet with you, we will discuss the information that we will need to help formulate a plan and draft estate planning documents. We have a checklist that gives a snapshot of the information we need to do this.

Once the documents are prepared, they will be sent to you for your review and for us to address questions or comments that you may have.

What specialists do I need to help me with my estate plan?

Besides a lawyer, it is usually wise to obtain tax advice from an accountant and also to consult with a financial planner and possibly an insurance broker. Many of our clients also make arrangements with funeral homes as a part of the estate planning process.

If you wish to appoint a corporate executor such as a trust company to be the administrator of your estate, it is also important to meet with representatives to determine costs and investment philosophy.

What are the key documents required in estate planning?

The key documents include a will, an enduring power of attorney, a representation agreement, an alter-ego trust and a joint spousal trust (if you are over 65 years of age).

How often should I update these estate planning documents?

Estate planning documents should be reviewed whenever milestones occur in your life such as marriage, the birth of children and grandchildren, the death of loved ones, divorce, etc. These significant milestones could affect the way you wish to distribute your property among your loved ones. It is always a good idea to review these documents regularly.

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What is a will?

A will is a document that comes into effect on your death. It appoints executors and trustees to manage your estate and sets out how your estate is to be divided and who is to receive your assets.

If you have minor children under the age of 19, a will usually appoints guardians for those children. While that guardianship could be challenged, setting out your wishes in your will shows a clear indication as to who you wish to take care of your children.

Why is a will important?

Without a will, you have no control over who will be responsible for the management and division of your estate. The British Columbia Wills, Estates and Succession Act dictates how your estate is to be divided if you do not have a will, and neither you (since you will be deceased), or your family will have any say where those assets end up.

Who should prepare my will?

When addressing this question, you should consider the fact that wills must be carefully prepared by a professional who has the proper expertise. We have made court applications for estate grants in circumstances where wills were deficient because they were prepared by non-lawyers. These court applications are very expensive and they inevitably delay the final distribution of the assets of the estate.

Once a will has been signed, notice should be filed with Vital Statistics Agency so that, upon your death, the person appointed as your executor can conduct a search to determine where your will is located.

We have a vault of original wills, which are easily accessible at all times. Experience has taught us that it is not advisable to keep an original will in a safe or a locked drawer at home; similarly, a will kept in a safety deposit box can be problematic if the person appointed as your executor does not have access to it.

What is an enduring power of attorney?

An enduring power of attorney appoints an individual (and perhaps an alternate) to make financial decisions on your behalf when you are unable to make these decisions for yourself or if it is impractical to do so. It is called an “enduring” power of attorney as it survives any physical or mental infirmity but ceases to exist upon death. In general, the person you appoint as your attorney will have the ability to sign documents on your behalf and to make purchases and sell your property. Often, people will use a power of attorney to set up or gain access to bank accounts.

What are the benefits of having a power of attorney?

A power of attorney is particularly important when there is insufficient mental capacity. The person(s) you appoint will deal with your financial affairs if you are not able to do so. Without having this in place, it is very possible that your loved ones will not be able to take care of your financial needs. For example, banks may not allow anyone to access your accounts, and it will not be possible for anyone to sell property or pay for care facilities or other medical expenses on your behalf.

What is a representation agreement?

A representation agreement authorizes an individual (and perhaps an alternate) to make health care decisions on your behalf when you are unable to do so. A common provision in a representation agreement is what is often referred to as a “living will” in which you authorize healthcare providers not to take any “heroic” measures that would not have the effect of prolonging your life.

What taxes or fees must be paid after a family member dies?

Once again, with some planning ahead of time, you can save not only time but also money for probate fees, funeral expenses, executor fees, and legal fees in the future.

Generally, the federal government (in particular, the Canada Revenue Agency) will deem that you have sold all your assets, shares, mutual funds and property on the date of your death for tax purposes. This can result in a huge tax bill! With an estate plan, you can transfer the ownership and minimize the taxes incurred (all under the watchful eye of your accountant).

Who can challenge a will and why?

Under the provisions of the Wills and Estates Succession Act, a child or a spouse of the deceased can contest a will. A will can generally be challenged if the person making the will did not have the necessary mental capacity to appreciate what he or she was signing. It can also be challenged if there was undue influence or duress on the person who made the will at the time that they made it.

What is a trust?

There are many types of trusts. In general terms, a trust is a legal arrangement that allows one party (the trustee) to hold property for one or more others (the beneficiaries).

For example, a trust can be included in a will, where you have directed that specific sums of money be held by your executor and paid out to beneficiaries (such as minor children) at certain ages. The key here is that the trustee is to invest and manage these trust funds until your children reach specific ages but there is usually a clear term allowing your trustee to use whatever funds they require (whether capital or income) for the education, health, maintenance and benefit of your children.

Once you have reached the age of 65 years, you can create either an alter-ego or joint spousal trust. These trusts have many benefits. All your assets are transferred into the name of the trust and the trust makes clear provisions for you to use the assets during your lifetime as well as what is to happen after your death. There is no need to probate the estate and those indicated as beneficiaries of the trust generally do not have the right to challenge the same. It is important that you also consult with an accountant to obtain advice as to the tax benefits of a trust.

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