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Protect your legacy, protect your family — It’s never too early to start estate planning

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There comes a time when we all need to consider what we’re leaving behind for future generations — and that time is now

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I often reflect on the Benjamin Franklin quote, “In this world, nothing is certain except death and taxes.” It’s a famous saying, yet most Canadians still do not have a will and fail to plan accordingly for the future of their estate.

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Raising a family or building a home can mean more than the responsibility of parenthood; the day-to-day eventually becomes the big picture and this includes building a legacy that endures beyond your years. There comes a time when we all need to consider what we’re leaving behind for our future generations — and that time is now.

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It is never too early to start estate planning, because death or incapacity are often unexpected. I’d like to highlight the importance of taking action and preparing a plan by sharing a few situations that inevitably result in family dysfunction.

Not having a will

A will is the foundation of your estate plan. If you die without formally indicating your wishes, you die “intestate,” meaning provincial law determines how your assets will be distributed. This can result in your family facing delays and additional expenses, assets being distributed to unintended beneficiaries, and the owing of unnecessary taxes.

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Not having a complete plan

Having an updated will is an important part of your estate plan, but there are other important considerations. An estate plan should include a power of attorney and representation agreement. It should also consider tax-planning opportunities, charitable wishes and business succession planning. How assets are owned (for example, joint ownership or tenants in common) and beneficiary designations should also be reviewed. The use of trusts and insurance may form an important part of your estate plan.

A will is the foundation of your estate plan.
A will is the foundation of your estate plan. Photo by Getty Images/Thinkstock

Not appointing an executor, guardian or trustee

Your will names your executor, guardian and trustee, and without one, these roles will be determined by the courts. All these individuals play a critical role after you pass away. Your executor will administer your estate, which includes accounting for and distributing your assets, paying debts, filing final tax returns and seeing that your wishes are met. With all these responsibilities, the settlement of your estate may be a long and complicated process for your executor.

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Your guardian is legally responsible for caring for your minor children, and your trustee is responsible for specific assets that are held in a trust. The executor, guardian and trustee may be the same or different individuals, depending on your personal circumstances.

Not having a succession plan

Estate planning is imperative for business owners and entrepreneurs. In the event you pass away, a succession plan needs to be in place to ensure the business continues to successfully operate. Ask yourself: who will be responsible for running the business? Will it be sold or remain in the family? What is the fair market value of the business and is there money available to cover ongoing expenses and liabilities during any transition period? Is there a partnership agreement and does the partner have the cash to purchase your share of the business from your estate?

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Not clearly communicating wishes to your family

As parents, we often default to fairness and equality, but as my colleague, senior financial adviser Ron Haik, shared in a recent podcast episode, “What is equal is not always fair, and what’s fair is not equal.” You cannot simply stamp an equals sign on your affairs and assume all will be well. Equality is dictated by the circumstances in your family and these circumstances always have the potential to change over the years.

I’m often asked: Is it ever too early to start an estate plan? Are you ever too young to prepare a will?

Again, death and incapacity may unexpectedly happen at any age; if you have assets, are married or have children, you should have a will. If you have young children, arguably the most important part of your will is to name a guardian to care for your children while they are minors. It is also important to consider who you would like to manage your children’s inheritance, which may be someone different than your chosen guardian.

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You don’t have to take all of this on by yourself. Engage professional advisers when you begin to prepare your estate planning documents. First, consult your professional financial adviser to assist you with the implementation of an estate plan. Your financial adviser will be familiar with your personal and financial situation, can discuss your objectives and draft a framework for your estate plan. Second, engage a lawyer who specializes in estate planning and can prepare your will.

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More often than not, there are taxation, creditor, business succession and marital considerations. For my clients, I frequently pull together a “dream team,” composed of their financial advisory team, estate lawyer and accountant who can give direction in their respective areas. There are upfront costs in engaging professional advisers, but having a proper estate plan in place will give you peace of mind and save money in the long run.

Regardless of how you proceed with your estate planning, always note that such plans should be regularly reviewed and updated if there is a major change in your personal situation. This can include having children, becoming married or divorced, the death of a beneficiary/executor, moving to another province or changes in estate laws.

Engaging your dream team of advisers can ensure you have a united group watching out for your — and your family’s — best interests.

Jennifer Leathem, CFP, CIM, is a financial adviser at Nicola Wealth.

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