Planning your estate: the six key steps

It’s easy to put off estate planning, especially if you’re in the prime of life. But the truth is that life is unpredictable. Before the unthinkable happens, it’s always best to make sure your wishes will be respected. With careful estate planning, you can protect the people who matter most to you. You can protect the value of your assets and reduce administrative costs and tax burdens while ensuring you don’t leave a complicated and potentially divisive situation for your loved ones. 

Here are six steps to follow for an optimal, harmonious transfer of wealth to your heirs. 

Start by getting an overview of your assets: bank accounts and investments, as well as real estate, life insurance policies, registered plans such as RRSPs, RRIFs and TFSAs, pension plans and other types of assets, such as valuables and artwork. 

It’s crucial that you gather all the official documents pertaining to your assets, including property deeds, account statements, life insurance policies and any other information that could facilitate the management of your estate. Having these documents well organized not only makes for better planning but also simplifies the estate-settlement process for your loved ones. 

Before you write a will or draw up an estate plan, it’s important to set goals. Do you want to ensure your spouse will be financially secure? Do you want to support a charity? Do you want your children to inherit equally or according to their specific needs? 

These questions will determine the structure of your plan. A professional can help you set your goals and create a succession plan that reflects your wishes. The plan should include a will—a key document to formalize your decisions—which should be reviewed regularly to reflect any changes in your personal or financial situation. 

There are varied ways to pass on wealth, but three stand out: wills, trusts and gifts. 

• The will is the central document that determines how your assets will be distributed after your death. It’s essential to have an up-to-date will that reflects your wishes and the current needs of your loved ones. Without a will, your assets will be divided according to provincial laws, which may not correspond your wishes. It’s also important to review it regularly, especially after important life events, such as a marriage or the birth of a child. And while you’re drafting or amending your will with a notary, take the opportunity to obtain a protection mandate. 
• A trust protects your assets while enabling a flexible distribution of them. It’s especially useful if you have minor children or want to allocate your assets gradually. For example, a trust might specify that your children will gain access to their shares of your estate only at a certain age or on certain conditions. In addition to protecting your loved ones, a trust can also offer tax benefits. 
• Gifts during your lifetime can be a judicious way for you to reduce the size of your estate, while giving the opportunity to see the positive impact of your generosity on your loved ones. For example, you could contribute to your children’s FHSAs to help with down payments on their first homes or you could fund your grandchildren’s education by contributing to RESPs. In addition to facilitating the inheritance process, gifts can also reduce the tax bill that will have to be paid when you die. 

Estate planning isn’t just an administrative matter. Your loved ones will have decisions to make. Your executor (officially known as a liquidator in Quebec) will be responsible for ensuring the orderly settlement of the estate in accordance with your wishes. The choice of this trusted person, who will be named in your will, is all-important, and it may be relevant for the executor to hear about your wishes from you yourself rather than through notarized documents. The same is true for your heirs, who may have to make preparations to receive the property and assets you bequeath to them. 

Tax optimization is an integral part of sound estate planning. By structuring your assets intelligently and using the tools at your disposal, you can reduce the taxes your heirs will have to pay. These strategies include registered plans (RRSPs, RRIFs and TFSAs) and the giving-while-living strategy. 

Taxation can be complex. Without going into the weeds, you should understand that certain decisions, such as the choice of your savings accounts and how you distribute your assets, can have a significant impact on how much your heirs will receive. A professional can advise you on the tax strategies suited to your situation. 

Once the estate plan is in place, it remains to be carried out by your executor after your death.  

The person you designate for this role will be responsible for paying debts, managing tax aspects and distributing your assets according to the instructions in the will. It’s vital that your wishes be clearly documented and that key stakeholders, such as your financial planner, notary and executor, have access to all the necessary information to avoid delays or family disputes. 

It’s always best to start estate planning early, even if the process may seem daunting, nerve-wracking or premature. By taking the time to structure your plan properly, you can ensure not only peace of mind for your loved ones but also an orderly transfer of your wealth.