Estate planning can be difficult to discuss with your loved ones, but it’s an important part of your overall financial plan. It should be explored openly – and early on – with your new partner. Regardless of your net worth, having an estate plan in place will give you peace of mind knowing you’ve made your best efforts to ensure your family’s future well-being. So once you’ve said “I do,” consider these four estate planning must-dos:
1. Drafting wills
Regardless of how much, or how little, wealth you’ve accumulated, you should have a basic will in place that reflects your wishes. It’s often assumed that if you die without a will, your estate will simply pass on to your spouse. But this would only happen for assets that are held jointly with right of survivorship. Note that joint tenancy with right of survivorship is not recognized in Quebec. In Quebec, ownership of property by more than one person can only be achieved by way of co-tenancy, also known as tenancy in common.
If you die without a will, or intestate, your provincial government decides how your assets will be divided – not you. Intestacy does not take into consideration any intentions you have for the distribution of your estate.
In addition to determining the beneficiaries of your estate, your will should:
– Name the person who will be responsible for administering your affairs upon your death (executor, trustee, liquidator or institution)
– Name a guardian for any minor children
– Express any limits on the use of your assets
If a prenuptial agreement was signed, the terms of that agreement should also be addressed in the will. Your estate plan should reflect the prenuptial agreement to ensure it’s executed in the way it was intended.
2. Powers of Attorney for Property and Personal Care
If you are ever unable to make your own financial or personal care decisions due to illness, incapacity or other unforeseen circumstances, you can arrange for a Power of Attorney (POA) to be drafted, naming the person who you wish to make these decisions for you. A lawyer can draft separate documents assigning powers of attorney for property and personal care. The persons named may or may not be the same individual. In Quebec, a power of attorney is used for the administration of property only and may or may not be notarial. In contrast, a protection mandate can cover the administration of property, but it can also contain provisions for the protection of the mandator’s person, including care and living arrangements.
The POA for Property gives one or more people the authority to manage your financial affairs if you are not able to. This person, or these persons, can have a significant impact on your well-being, as they have the authority to do almost anything that you could do with your property, such as signing cheques and paying bills. However, this kind of attorney cannot change your will or assign a new POA on your behalf.
The person named in your POA for Property does not have the authority to make decisions about your personal care (unless you’ve designated the same individual for both). Medical and lifestyle decisions must often be made quickly when someone is seriously ill. If you become incapable of making decisions for yourself, someone else must make them for you. This person is called your “substitute decision-maker” (referred to as a “mandatary” in Quebec). Designating a POA for Personal Care lets you choose a person you trust to be your substitute decision-maker if you become mentally incapable. This person will make decisions with regard to your health care, nutrition, shelter, clothing, and safety issues, as well as ensuring your wishes are met from a medical perspective.
The individuals you select as POA for Property and Personal Care should live in close proximity to you, be trustworthy, have your best interests at heart and be knowledgeable about financial matters. Set out the scope of powers that will be given to your attorneys, and then discuss your financial situation and wishes with the people you choose before you sign the document.
3. Beneficiary designations
Beneficiary-named registered accounts and life insurance proceeds are not included in a will (except in Quebec). The funds or death benefit are distributed according to your directions. You should contact your employer’s HR department and your investment/insurance advisor to update any beneficiary designations that do not align with how you would like to distribute your estate. Note that, for residents of Quebec, beneficiary designations need to be made in a will or marriage contract. Designations made in the contract with your financial institution are not recognized.
4. Updating and reviewing your estate plan
Update and review your estate plan regularly – every three to five years – and especially after life milestones such as the birth of a child or a substantial wealth gain. This lets you trace your progress and revise your financial plan as needed. It should include a review of your employer’s benefits statement for coverage and beneficiary designations for life insurance, registered savings plans, and pensions.
With plenty of other things to think about, drafting an estate plan may not be top of mind for most newlyweds. But it’s a necessary step in ensuring your assets and loved ones are protected as you begin your life together.
Matthew Sears, T.E. Wealth, Toronto
Quebec content: Karen Hennessy, T.E. Wealth, Montreal
This article was published in T.E. Wealth’s Strategies newsletter, May 2017 edition. Read the full edition here.
These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.