Chapter 15

Estate Planning

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Kapoor Dlabay Hughes Ahmad

Prepared by Cyndi Hornby, Fanshawe College 2009 McGraw-Hill Ryerson Ltd.

Learning Objectives - Chapter 15

1. Analyze the personal aspects of estate planning.

2. Assess the legal aspects of estate planning.

3. Distinguish among formats of wills.4. Appraise various types of trusts and

estates.

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Learning Objective # 1

Analyze the personal aspects of estate planning.

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Why Estate Planning?

Your estate consists of everything you own. Estate planning is a definite plan for the

administration and disposal of one’s property during one’s lifetime and at one’s death. is not just for the wealthy. includes both building your estate, and also

transferring your estate upon your death. Used for tax purposes as well as choosing a

guardian for your children and avoiding family fights over personal belongings.

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What is Estate Planning?

Two components of estate planning building your estate through savings,

investments and insurance transferring your estate, at your death, in

the manner you have specified Implemented by a will and trust

agreements Knowledge in certain areas and good

record-keeping are helpful.

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Provincial Family Law

Getting married will void a will made prior to getting married

Divorce or separation may affect the validity of all or part of a will

Has an impact on your capacity to order the disposition of your will designed to protect those financially

dependant upon you If you die without a will (intestate) your

estate is distributed through the legal system

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Learning Objective # 2

Assess the legal aspects of estate planning.

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Legal Aspects of Estate Planning

Upon death proof of claims must be produced

Important papers to maintain include; birth/marriage certificates legal name changes military service records and veteran documents government benefit documents insurance policies safe deposit box records bank accounts stock/bond certificates Registration of automobile

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Wills

A will is the legal declaration of a person’s mind as to the disposition of his or her property after death.

Intestate: if you die without a valid will established Provinces law of descent and distribution

becomes your copy of the will “spouses” receive preferential share and balance

is distributed to your dependants Marriage and divorce affect your will.

Review your will with an attorney. Marriage may revoke your will.

Legal costs to prepare a will vary with how complex it is. A standard will costs $300 and up Does not include living will and power of attorney

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Learning Objective # 3

Distinguish among formats of wills.

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Formats of Wills

Holographic Will A hand-written will you prepare yourself. Must be written, signed and dated in your

handwriting May not be legal in some provinces

Formal Will Can be prepared by an attorney. Can be typed or on a preprinted form. Names beneficiaries. Must be signed & have two witnesses

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Formats of Wills

Notarial Will Available only in Quebec Made in the presence of a notary and at

least one witness Does not require probate

Beneficiary a person who has been named to receive

property under a will

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Probate

Probate The legal procedure of proving a

valid or invalid will Probate court generally validates

wills and make sure your debts are paid

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Choosing an Executor

Find out if an executor is willing to accept this major responsibility.

Find out if he/she is capable.

If you don’t nameone the court will.

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Responsibilities of an ExecutorPrepare an inventory of assets and

liabilities Collect any monies due and paying off any

debtsPrepare and file all income and estate tax

returnsLiquidate and reinvest other assets to pay

off debts and provide income for familyDistribute estateMake final accounting to beneficiaries and

probate court

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Selecting a Guardian

If you have children you need a will to name their guardian.

A guardian assumes the responsibility for providing the children with personal care and managing the estate for them.

Be sure the person is willing to accept the responsibility and their values and child rearing practices match yours.

Trustee: a person who holds or manages property for the benefit of someone else under a trust agreement

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Altering or Rewriting Your Will

Add a codicil. A document that modifies provisions in

an existing will. Prenuptial Agreement

waives rights to each others property that was acquired before the marriage

agree on a settlement if you should divorce

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A Living Will

A document that enables an individual, while well, to express the intention that life be allowed to end if he or she becomes terminally ill

Discuss your living will with those close to you, and your family doctor.

Sign and date it before two witnesses. Give copies to those close to you. Requires careful thought.

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Power of Attorney

Power of attorney. Legal document authorizing someone

to act on your behalf. Usually if you become ill or

incapacitated Power can be special (to carry out

certain acts or transactions), or general (to act completely for you)

Conventional Power of Attorney is automatically revoked in case of legal incapacity

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Letter of Last Instruction

Not legally enforceable. Provides heirs with

information. Should include...

Your funeral preferences. Names of people you

want notified. Location of safe deposit

box & bank accounts. Assets and debts.

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Learning Objective # 4

Appraise various types of trusts and estates.

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What is a Trust? A trust is a legal arrangement through

which a trustee holds your assets for your benefit or that of your beneficiaries.

Settlor (grantor) is creator of the trust All trust assets added together are known

as an estate. Benefits of trusts: Reduce estate taxes,

avoid probate, free you from managing assets, and provide income for a surviving spouse, ensure property serves a desired purpose after your death.

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Types of Trusts

Living (Inter Vivos) Trust is created and provides benefits while you are

alive Testamentary Trust

established by the creator’s will that becomes effective on death

Spousal Trust all income from trust must be paid during

spouse’s lifetime capital cannot be distributed to anyone else

during spouse’s lifetime

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Make an Inventory of Your Estate

Cash, bank accounts, GIC’s, money market funds

Stocks, bonds and mutual funds. Life insurance, employee benefits and

annuities. Your home and any other real estate. Business and farm interests. Corporate interests, partnerships Interests and trusts. Antiques, art, collections, cars.

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Estate Assets not Distributed by A Will

Life insurance, annuities and RRSP’s go directly to the named beneficiary

Assets held in joint tenancy confers rights of survivorship

Life insurance and employee benefits free of income tax excluded from probate

Lifetime gifts and trusts

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Settling Your Estate

If you have a will the executor will carry out your wishes

Probate and Administrative Costs fees for attorneys, accountants,

appraisers, executors and administrators (3-5%)

probate costs rise with size of estate If you die intestate your estate is

distributed according to provincial law Under control of court-appointed

administrator

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Summary of Learning Objectives

Analyze the personal aspects of estate planning Essential part of retirement planning and

integral part of financial planning First step is to build your estate Second step is to transfer your estate

At your death in the manner you have specified

Personal aspects depend on if you are married or not If married involves interests of two people or

more if children Even if not married need to organize your

affairs

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Summary of Learning Objectives

Assess the legal aspects of estate planning In the event of death proof of claims

must be produced or claims not processed

Papers required include birth and marriage certificates, legal name changes, military service records

Every adult should have a written will Legal declaration of wishes with respect to

the disposition of property after death

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Summary of Learning Objectives

Distinguish among formats of wills Holographic – hand written and requires

no witnesses Poor choice and not recognized in some

provinces Formal – typed document signed by you

and witnessed by two individuals not spouse or beneficiaries Lawyer usually employed to draft formal will

Notarial – typed and signed in the presence of a notary and one witness Available only in Quebec

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Summary of Learning Objectives

Appraise various types of trusts and estates A trust can be an excellent way to

manage your estate Popular forms of trust include;

Living trusts Spousal trusts Testamentary trusts

An attorney’s help is needed to establish a trust

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