It’s that time of year to set new goals and to strive for positive change to build the life you want today and in the future. Many of us make resolutions to eat healthier, quit smoking, or to get organized. In addition to tackling these ambitious goals, it’s a great time of year to contemplate the kind of legacy you want to leave your family once you are gone. Legacy planning includes proper financial planning, estate planning, and personal planning with a goal to protect your loved ones and yourself in the years to come. The best time to do planning, or review your existing plan, is now, while you are motivated, healthy and before a crisis occurs. The good news is that planning can be quick and easy.
Every adult needs a Will, a Power of Attorney and a (Health) Representation Agreement. Making a Will is the best way to ensure that the people, charities and organizations you cherish most receive the benefit of your estate. A Will is especially important for people with young children, or children with special needs, to ensure they are properly cared for in the event you aren’t able to do so. A solid Will and Estate plan is also a good investment and it is important to save tax, avoid higher costs and avoidable delays and minimize potential squabbling among family members once you are gone.
As each person has a unique family and asset picture, their Wills should be tailored specifically for their needs.
Some key legacy-planning considerations to keep in mind:
Planning can be done quickly and painlessly
This process is quicker and easier than most people think. Professional advisors are skilled at getting the information and instructions they need from you to complete your plan in a straightforward, and simple manner, in many instances, within a week or two.
Existing plans need to be reviewed regularly
If you have done planning in the past, now is a good time to review your plan. A review can flag tax saving opportunities occasioned by changes in the law, the economy, and your personal circumstances as well as the need for modifications in your plan due to changes in your lives and those you care about.
Don’t forget to review beneficiary forms
Certain financial assets, such as insurance, RRSPs, RRIFs and pensions are distributed according to beneficiary designation forms filed with the bank or financial institution holding your account. Designations allow you to name any beneficiaries you want to receive that assets once you are gone, including friends, family members, a trust or charity. It’s best to name both primary and alternate beneficiaries and get advice on the pros and cons of naming your estate as beneficiary as this could result in a loss of potential tax benefits.
Think about cash flow
Couples should make sure there is enough cash available, or there is access to funds, to cover immediate expenses if one of them suddenly passes away.
Consider gifting some assets now
There may be tax benefits as well as personal advantages to gifting some of your assets before you die. However, a threshold question for anyone contemplating this strategy should be to ensure that you can afford to do so. Be on the safe side and be sure that you are leaving yourself enough to live on assuming you live to an advanced age and may require expensive living assistance at the end of your life.
Watch out for the separate estate taxes on foreign properties
If you own a foreign vacation property or shares in a foreign company, the tax and estate rules of that jurisdiction should be an important consideration in your planning. Without proper tax planning, however, the decision to purchase a foreign vacation property may result in some unexpected and expensive tax consequences. For example, owners of U.S. real estate are subject to U.S. estate tax even though they are not residents of the U.S. for tax purposes.
Anticipate a time when you may not be able to think for yourself
Regardless of your current age or health, it’s crucial to anticipate that at some point you might become physically or mentally unable, temporarily or permanently, to manage your finances or make legal and medical decisions. A key aspect of estate planning is appointing someone you trust to act on your behalf in financial, legal, medical and personal care matters in case you can’t. Many are surprised to learn that your spouse is not automatically your attorney and that you require a Power of Attorney in order to make this appointment. Medical decisions as well as personal care decisions such as, living arrangements, diet, taking part in activities, obtaining licenses and permits, and personal safety issues.
If you have minor children, or a child with special needs, appoint a guardian
Few prospects are more wrenching than the possibility that young children will lose a parent. Often, parents put off writing a will because this particular thought is unbearable or couples cannot agree on a potential guardian. Some incorrectly assume that it is enough to ask a relative or friend to step in if the need arises. If you are a single or surviving parent and have not outlined your wishes in a will, a court usually decides who fills your shoes. A custody battle might erupt or, awful as it sounds, no one may want your children. And without financial planning, there may not be enough money for your child’s support. Similarly, careful planning is required to plan for the care and financial support of a child with a disability or special needs.
Consider whether you need trusts
A trust is a legal tool that many believe are only for the very wealthy. Trusts can be useful for people of more modest means for many purposes. A trust can be used to:
- Safeguard assets and provide for your care, should you no longer be able to handle your own affairs;
- Avoid probate, and retain privacy for your estate as your will and all the details it contains through probate become part of the public record;
- Provide for children from a previous marriage and in blended families;
- Hold money for minors and ensure that they can’t spend it all the minute they come of age.
- Prevent funds from being eroded by spendthrift family members;
- Protect you and your heir’s assets from creditors and former spouses;
- Protect the financial well-being of a child with special needs; and
- Planned giving.
It’s easy to get started on your legacy planning resolution by contacting your trusted financial and legal advisors.