Estate Planning: Easy Steps That Make the Difference (Part 1)
Few people in their prime actually like planning for the end – we would rather plan for vacations.
However, the press of modern life, changes in personal values, increasing mobility, new technologies and growth of wealth complicate the law and make estate planning a necessity.
While a will is the first thing we may think about, it is not the only one. Sometimes it may be not the best one in terms of timing, expenses or scope of application. Some people may be good with dry and simplified statutory provisions, others prefer more complicated estate planning options, such as changing ownership structure of their assets, making gifts during their lifetime or establishing trusts.
Still, here are a number of general tips one may keep in mind when preparing for the unexpected.
1. Consider who will take care of you and your property in case of a sudden incapacity
In Alberta, the court can grant legal authority to another person to make financial decisions or to take care of an individual who lost capacity. The process is time-consuming and unpredictable. A better option may be to execute an Enduring Power of Attorney and a Personal Directive since you prepare them at a time when you are capable of making your own decisions. You sign these documents in advance, choose people you trust and provide for detailed instructions. You do not need court approval for these documents. However, they become effective only if you lose capacity. The incapacity must be confirmed with an assessment. You can name people in your Enduring Power of Attorney and your Personal Directive, such as, for example, your family member and your family doctor, to undertake the assessment and to determine whether you lost capacity.
2. Make sure that you know who can manage and inherit your property
Generally, no one can lawfully access your bank accounts, rent out your property or sell your car without your permission, no matter how desperately you or your family needs money. When you travel a lot or have mobility issues, you may be good with a Power of Attorney or similar documents where you appoint people to represent you and set limits for their authority. When you lose capacity, you need an Enduring Power of Attorney or a court-appointed trustee to take care of your property and finances.
The rules of succession also have some pitfalls. In Alberta, your spouse will get all your property if all your children
In Alberta, if you leave no will, your estate property will be distributed pursuant to the intestacy provisions of the Wills and Succession Act, unless your other specific instructions or other rules of succession apply. The intestacy provisions of the Wills and Succession Act say that, if you are married and all your children are also the children of your spouse, your spouse will receive all your property minus all debts and expenses your estate has to pay.
By specific instructions I mean, for example, insurance and pension plans, bank accounts, RRSPs, RRIFs, TFSAs and other registered investments, as long as you specifically designate a beneficiary for them. If this is the case, these assets will not form part of your estate and will pass directly to the designated beneficiary. It may work well when it saves time and expenses. However, the succession may get complicated when the designated beneficiaries are minors or people with limited capacity.
As for special rules of succession, joint tenancy is an example. We often hold bank accounts or real estate property jointly with another person. The general rule in Alberta is that your share in the jointly owned property will pass directly to the surviving joint owners and will not form part of your estate, to the result that it may go to people you do not want to see among your heirs. Another issue is that the general rule of joint tenancy regime has a number of exclusions. For example, funds held on a joint bank account may ultimately belong only to one account holder if there is evidence to support the entitlement.
Considering all these red flags, I encourage you to check your documents, designations and entitlements to make sure that they comply with your intentions.
And that’s it for now. We have discussed a few starting points for estate planning. Later I will tell you about other important things, such as “digital assets”, minors’ property and mitigation of potential conflicts between our significant ones in emotional times.