Estate planning does not need to be done all at once. Break it down into easy steps. Estate planning is not just for the elderly or the retired. Even young families have decisions to make.
What is an estate plan?
When people talk about estate planning, they’re usually referring to asset distribution. In other words, they’re talking about how your wealth, assets, pensions, and more will be gifted to your heirs or other beneficiaries after you pass away.
But an estate plan is a bit more than that. In addition to determining who you’d like to give your money and property to, you should think about caregivers for dependents, future healthcare decisions in advance, etc. For example, some people have strict religious beliefs about being resuscitated or might not want to take certain drugs for personal reasons. Your estate plan can and should deal with these issues so that your loved ones don’t have to.
Okay, so what makes up an estate plan?
An estate plan is made up of a handful of very important documents, each with a different and unique purpose. As we mentioned above, some of these estate planning documents let you choose what sort of care you want to receive in the hospital, while others can set up trust funds for your children or decide who will run the family business.
This is an overview of the most popular estate planning documents:
Last Will and Testament – lets you choose who inherits your assets, selects guardians for your children, and names an executor to make sure your wishes are carried out. It’s the most important part of an estate plan.
Living Will – lets you decide the sort of care you want if you are hospitalized and cannot make decisions for yourself. For example, some people have strong religious beliefs about being resuscitated and may choose to note those in their Living Will.
Healthcare Power of Attorney – addresses the same medical treatment issues as in a living will, but instead of laying out your choices in a document, you name another person to make those decisions for you. Generally, this is a spouse, family member, or close friend.
Financial Power of Attorney – lets you choose a trusted agent to act on your behalf to handle your finances. For example, you can give them specific access to accounts to help make sure your bills and mortgage stay current. This can been set up to be envoked at any time, or only at the point you are no longer able to make decisions for yourself.
Trust – allows you to set aside money and other assets for people or organizations (usually charities). These accounts do not go through probate, which can be a long, drawn out process and in some provinces, can be very costly. With a trust in place, your heirs will be able to inherit what you want them to have, faster, and without nearly as much hassle however this does create a separate ongoing taxpayer with legal and accounting costs for future years.
It is useful to have discussions with both your accountant and an estate lawyer when setting up an estate plan.