Almost all of my clients share the same goals eliminating uncertainties over the administration of their estate and the maximization of the value of their estate. Unfortunately, many of them also share myths and misconceptions around estate planning. Here are some of the most prevalent estate planning myths and misconceptions and the facts behind them:
Myth #1 – Estate planning is just for the wealthy
Estate planning is about making sure that your finances are taken care when you die, but also if you’re incapacitated, that decisions about your health care are carried out the way you’d like even if you’re not able to make them, and that your children and other heirs are taken care of when that time eventually comes. For families with young children, the most important part of a will has nothing to do with money, it’s about appointing would care for your child or children should something happen to both parents. The guardianship clause in your will allows you as parents to decide who would care for your child(ren) should something happen to both of you and your child(ren) is under 19 years of age. In a nutshell, estate planning is for anyone who may be involved in an accident, become seriously ill or pass away. In other words, it’s for everyone.
Myth #2 – Estate planning means having a will
A will is an essential part of a good estate plan, but there are at least three parts to a complete plan. Powers of attorney and (Health) Representative Agreements are the two other important parts of a plan. These are referred to as “living planning documents” because they are in effect when you are alive and end when you die. A Will comes into effect only once you die. A Power of Attorney is a legal document for personal planning in British Columbia and is a way to authorize your family or friend to manage your financial and legal affairs if you need assistance due to illness, injury and disability. A Representation Agreement is the key legal document in British Columbia for personal planning and advance health care planning. It is a legally enforceable document and used in case of incapacity, for end of life and other support needs.
Myth #3 – I’m too young for estate planning.
We never know when we might need estate planning and by then, it will be too late. Unfortunately, illness and accident can happen to anyone at anytime, and it’s important to complete planning while you are healthy and hold the requisite mental capacity to do so. Furthermore, if you have a minor child, it’s time to plan now.
Myth #4 – If I pass away without a will, my spouse will get my assets so I don’t need a will.
If you pass away without a will (or die “intestate”), the law of intestacy (Wills, Estates and Succession Act, or “WESA”) will be applied to determine who will get what in your estate. The scheme of distribution set out in WESA is called the “parentelic system”. Under this system descendants of the nearest common ancestor always take before descendants of a more distant ancestor and distributions are likely to be divided between the two sides of the deceased person’s family. Clients often forget that they may outlive their spouse, and possibly even one or more of their children. Even if you are fine with this uncertainty of who gets what, if you have minor children, you need a will anyway to ensure that you, and not the court or someone else, determines who should be the guardian of your child(ren).
Myth #5 – I don’t need a will because I’ll be dead and my family can deal with it
Writing a Will is not about you, it is a simple courtesy for your loved ones that you leave behind. Your family and friends will not only be upset by your passing but they will be left to deal with your affairs and assets and without direction and guidance uncertainty, high emotions and competing interests can often tear families apart. Writing a Will saves months or possibly years of pain for those that you leave behind. It also ensures that most of the estate stays with your loved ones and is not wasted by legal fees resulting from a family feud. Some people think that they don’t need a will because their family or friends will “know what to do”. Unfortunately, friends and family can’t make decisions on your behalf if you pass away without a will. Without a will explaining your interest, the Court decides who gets your assets and decides who will take care of any minor children.
Myth #6 – I don’t need a lawyer at all.
In my experience, very few people should consider a do it yourself will or will kit. These should only be used if an individual’s financial circumstances and wishes are very simple. You might save money up front compared with using a professional service, but if you get anything wrong you could end up costing your loved ones time and money when it comes to sorting out your affairs after you’ve died. Even worse, if you draft the will poorly, it could even mean that your will is invalid and then the law decides who your money and property should go to.
You should definitely seek the assistance of a legal professional if you meet any of the following criteria: you own a business, you own foreign property or investments, you have a blended family, you have dependants in addition to your spouse and or children, you have complicated wishes, you have a disabled beneficiary or a beneficiary with mental health and/or addiction issues, or you require tax planning. Furthermore, while these documents may cover most common situations, there may be a complicating issue warranting legal advice that you’re not even aware of. That’s why it’s still a good idea to at least run these documents by a qualified estate planning lawyer.
Myth #7 – If I have a will, I don’t have to worry about probate.
While a will provides the court with guidance on your wishes, having a will isn’t what determines whether your estate must be probated. In B.C. there is no requirement that every Will be submitted to probate, probate usually becomes necessary because third parties, such as financial institutions, ICBC or the Land Title Office, who want assurance that the executor of the estate has the authority to deal with a particular asset. If probate is required, the entire value of estate assets located within B.C. is subject to probate fees. This is true even if probate is required because of only one asset, such as a car or term deposit. The B.C. Probate fee is 1.4% of that portion of an estate in excess of $50,000 of value, and 0.6% for that portion of an estate valued between $25,000 and $50,000. For example, the probate and filing fees for an estate worth $250,000 are just over $3,000.
Myth #8 – Probate should be avoided at all cost
The probate process does cost money in the form of Probate fees, legal fees, court filing fees, and miscellaneous costs. However, many methods of avoiding probate cost money as well. You need to understand the real costs of probate, and the real costs of avoiding probate, before you make your choice. Your financial and legal advisors can help you assess these costs.
Knowing the truth about these myths can help you avoid numerous mistakes. All people, young or old, rich or not, share many of the same concerns and considerations in estate planning – we all want to deal with what we have in the most effective way we can, doing the best for those left behind, reducing tax, and making our wishes known.
For more information about wills and estates planning, or to start building your estate planning strategy, contact us today!The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.