Winding Up an Estate
This article was reproduced from TD Mutual Funds, 2003
What is Estate Planning?
Are you in the process of preparing your own Will or have you been appointed an executor? The idea may seem intimidating or unpleasant, but is absolutely necessary to organize your financial affairs in order to provide for the well being of your family members after your death. Estate planning is the process of providing for theo rderly transfer of your assets to your chosen beneficiaries, making sure that your estate is distributed the way YOU want it to be.
Why Plan?
Good financial housekeeping should be a priority and the estate planning process is crucial. There are many reasons for organizing and working on an estate plan, and may include:
ü Reducing taxes and probate fees payable up on death
ü Minimizing cash flow problems between the time of death and the settlement of the estate
ü And most importantly, by gathering together a list of your assets, you can ensure that these assets will be distributed according to your wishes
Why a will?
The will is the key element of estate planning. It allows you to provide for an orderly distribution of your assets in accordance with your desires and in a way that minimizes the tax burden on your estate and on your beneficiaries. You may wish to simply leave everything to your spouse, you may choose to leave specific assets, such as jewelry, artwork and furniture to specific beneficiaries, or you may want to leave a stated sum of money to certain people or to a named charity.
What happens if I don’t have a Will?
Without a Will, the result could be a legal and financial nightmare for your loved ones. Rather than you deciding how you wish your assets distributed, provincial laws and formulas determine the distribution of your assets. This is known as “intestate”, and is in accordance with the laws of “intestate succession” in the province where you resided at your death. If you want to ensure that your estate will be administered and distributed in an effective and tax-efficient manner, make a wise decision by drawing up a Will and entering into discussions with your financial advisor on estate planning that will allow you to control the distribution of your assets.
Why do I need an executor?
The person who administers and settles your estate is called an executor. You need an executor to ensure that the terms of your Will are carried out as you instructed. Choosing your executor is one of the decisions that you will have to make when you draw up your Will. Choose someone that you trust completely, who is comfortable working with financial information and who is able to act impartially on behalf of your beneficiaries. It is crucial that your executor have the time to devote to settling your estate. The tasks may be demanding, and the person(s) you select will have to be available to other professionals, including your financial advisor, insurance agent and lawyer. You will want to select someone who is likely to survive you.
Other alternatives include appointing two or more executors, or selecting a professional from a financial institution. Employing an expert and unbiased professional may be a good idea if your estate is complicated or you anticipate legal disputes arising out of the Will.
What will my executor have to do?
As an executor, a first decision may include making funeral arrangements. Another early task will be to locate the original copy of the most recent Will. Many Wills are located in safety deposit boxes, therefore, the executor will generally require a certified true copy of the death certificate, personal identification, and the known whereabouts of the safety deposit box. Usually, the executor and a bank employee will list the contents of the box, and a detailed copy of the contents will be given to the executor.
Settling an estate often involves a timeframe that you may find long. It doesn’t require legal training, just patience and attention to detail. As an executor, you will be dealing with Canada Customs and Revenue Agency (CCRA), lawyers, bankers and creditors. If the estate is relatively simple, it may not be a huge task. If the deceased person was well-organized and kept documents and information readily accessible, then the task should also be less onerous. Traditionally, being asked to act as an executor was an honor, and today, lawyers often suggest that their clients appoint both a primary executor (or co-executors), and a trust company to act together.
Your advisor will be a key resource for your chosen executor. After all, he/she knows the details of your financial lives and may also recommend professionals for the role of executor. Together these professionals and your financial advisor could assist you with updating your Will as your circumstances change. They can discuss insurance options that will meet the cash needs of your heirs and provide options on structuring your financial affairs that will maximize the estate that is transferred. Making these important decisions today will provide you and your family with peace of mind knowing that tomorrow is taken care of.
Other
articles included this month:
Retiring to the U.S. – Clients wishing to retire rich in the sunny south should know the consequences and benefits of collapsing their RRSPs
Return to March/April 2003 $$$
Maker Report