02 Aug An Introduction to Estate Planning: Understanding Wills and Powers of Attorney
The purpose of this post is to explain and explore the process of estate planning. While it is not always an easy topic to think about, an important part of becoming getting older is thinking about what happens to you and your family if you become disabled or when you pass way. Planning for these events is what we generally refer to as “estate planning”. The plan, in this case, takes its most concrete form in two documents, your Will and your Power of Attorney.
This post explores both documents, and the other issues and matters that we recommend considering and planning for as you go through the process of completing your estate plan.
What to Consider When Preparing Your Will
Your Last Will and Testament is a key part of ensuring that your last wishes are carried out fully and completely. A Will allows you to make appointments regarding who will administer your estate and how your assets will be divided and received. It also allows you to appoint guardians for any minor children. By doing so, you remove any doubt or uncertainty as to how things will be handled after you pass way.
For many young adults, making a Will is not something that is top of mind. However, it is generally recommended that you create a Will as early as possible and update it over your lifetime to ensure it is accurate and reflects your wishes and circumstances as they evolve. Each person’s Will can have unique terms to distribute gifts, express wishes with respect to personal possessions, or to leave money to charitable causes that may be important to you.
Many people also wonder why they may need a lawyer to help them make their will, as there are online and paper will kits to create your own Will. While these kits can be useful in some circumstances, they often are not detailed enough and, moreover, cannot cover other estate planning issues that surround and have an impact on the Will making process, including issues relating to real estate property, assets located outside Ontario, and other matters. As such, the advice of an estate planning lawyer can ensure that your Will is not only accurate, but that it is effective in meeting your personal and financial goals.
As you begin to think about your estate plan, there are a number of aspects that you should take into consideration.
Choosing an Executor
The Executor is the person that you entrust to carry out the instructions left in your Will. They will be responsible for arranging the funeral, gathering and securing your assets, and then distributing them according to your instructions. This person must be trustworthy and be able to handle the paperwork, asset distribution, and the other responsibilities that come with the role.
If you are in a relationship, most people will pick their spouse or partner as their executor. However, even in that case, you should consider who you would want as an alternate. If you don’t have a family member or friend that you trust to do this, you can choose a professional, like a bank or a law firm. Please note that these options come with fees to carry out the work.
Choosing a Guardian, if applicable
If you have minor children, it is important to consider who you will want to be guardian for those children should both you and your spouse or partner pass away. Sometimes this will be the same person as your executor, or alternate executor, but it can also be a different person.
Making gifts, and the distribution of the “residue” of your estate
After you choose your executor, and make any guardianship appointments, your next task is to consider what you want to happen with your property. In your will, you can make specific gifts (i.e. legacies) or you can simply set up a pre-determined split of the “residue” of your estate. The “residue” of your estate is the net value of your assets, determined after all debts, taxes, and estate expenses are settled and accounted for.
Generally, the beneficiaries of your estate can be any person, and the portion left to each of them can be customized as you see fit.
It is recommended that during the process of determining what you want to happen with your assets that you create a list of all of the assets and financial institutions with whom you have money or investments. This will make the process of administering your estate more efficient.
What Happens if I Don’t Have a Will?
If you were to pass away without making a Will, then your estate distribution is determined by the “intestate” laws of your province or territory. In Ontario, these laws dictate that your estate will go to your spouse if you are married with no children, or 1/3 to your spouse and 2/3 to your children if you do. If you are unmarried or widowed and have no children, your estate passes to your parents, or your siblings, or your nieces and nephews, or your cousins, depending on your living family.
Even though these inheritance laws are set out in Canada, without a Will, an executor still has to be appointed in order distribute the assets. In some cases, this person may be an obvious choice, but if not, there could be family in-fighting and conflict. Even if the path of the estate is clear, the process can be slower and assets can be frozen until the executor is officially determined.
Without a Will the distribution of your estate after death is complicated, lengthy, and can result in people receiving an inheritance that you did not intend. Creating a Will is thus key for ensuring your estate is distributed how you desire.
Financial and Medical Power of Attorney
There are two kinds of Powers of Attorney: a General or Financial Power of Attorney, and a Personal Care or Medical Power of Attorney. Each kind of Power of Attorney is a separate document.
The person you name in each document to act on your behalf is called your “Attorney”. Your Financial Attorney is responsible for handling your financial accounts, paying your bills, and making decisions associated with your assets and property. Your Medical Power of Attorney is someone who is appointed to make medical decisions on your behalf if you are unable to make them for yourself.
It is important to understand that by default, a Financial Power of Attorney is effective the date you sign it – meaning that the Attorney named therein can start acting on your behalf immediately and even before your become disabled or deemed incompetent to manage your own affairs. The Financial Power of Attorney is also generally drafted to be a “Continuing” document, meaning that it continues to be effective once you become incapacitated. In contrast, your Medical Attorney can only make decisions for you once you are deemed by the relevant health care practitioner of being incapable of making decisions about your own health.
Given the above, it is important that you choose the right person, or group of people, who will act on your behalf and who will have your best interest in mind. If you nominate more than one person, also consider if you want them to act jointly, meaning all Attorneys must make decisions together, or jointly and severally, meaning only one person would be needed at a time to make a decision.
Vandeputte Law Can Help
If you’re looking to create or update an existing Will, or prepare Powers of Attorney, Vandeputte Law in Hamilton can help. We will work with you to ensure that your assets and wishes are clearly defined in your estate plan to lessen the stress on your loved ones after you become disabled or pass way. Call us or emails us today and we can book an appointment to discuss your needs and take the next steps towards completing your estate plan.