Estate Planning 101

Ensuring you have a will allows you to control who gets how much of your assets after you’re deceased.

As the saying goes, there are two sure things in life – death and taxes. It might not be fun to talk about, but it’s important to plan ahead, organize your assets and put together a will.

Estate planning and ensuring you have a will allows you to control who gets how much of your assets after you’re deceased. This could save your spouse, children and other beneficiaries much time, effort and money. In fact, without an estate plan/will, the courts will appoint an administrator of their choosing to distribute your assets according to legal guidelines. And it may not be exactly what you want for your loved ones.

If you’re unsure about whether you need an estate plan and will right now (perhaps you think you’re too young, or not rich enough), think again. You should view this as simply planning for the future and making sure the most important people in your life are taken care of.

This is the first of a two-part series offering guidelines for estate planning. For the first part, I’ll provide some tips to help you get started in structuring your estate. Part two will cover the process of putting a will in place. Let’s begin with three main ways you can structure your estate to determine where you assets go.

Establish joint tenancy

The simplest way to control the distribution of your assets after you pass away is through joint tenancy. Joint tenancy makes you and another party such as your spouse or child “joint tenants with rights of survivorship.” In plain English, this means each party has equal rights of ownership of an asset, be it a chequing and savings account, term deposit, investment accounts or real estate. Upon the death of one owner, the deceased’s interest in the account terminates, leaving full ownership with the surviving joint owner(s). The asset does not become part of the deceased’s estate and does not have to go through probate. However, it is important to note that a transfer to someone other than your spouse or common-law partner may trigger capital gains taxes.

Name beneficiaries

The second option is to ensure you have designated beneficiaries for assets like your Registered Retirement Savings Plan, Registered Retirement Income Fund, Tax-Free Savings Accounts, life insurance, and segregated funds. By designating a beneficiary, these assets can be distributed without reference to a will. Review your beneficiary designations regularly and make any needed changes to match with your wishes.

Get life insurance

As part of an overall estate plan, I recommend life insurance, especially if you have a spouse or children who depend on your income to maintain their way of life. As well, life insurance can help reduce the tax burden your estate may generate for your beneficiaries. Think of life insurance as an investment in the future of your loved ones. It’s also important to review your policy regularly and adjust the coverage as your life situation changes.

If you need estate planning help, whether it’s establishing joint tenancy on assets, naming beneficiaries, or securing life insurance coverage, talk to your financial institution. Remember, we’re there to help. And watch for my next article which will focus on wills and how they can be used to determine how your estate is distributed.

Kathy McGarrigle is chief operating officer for Coast Capital Savings.

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