To protect our loved ones at the time of our death, it is essential to plan our estate well. Here are 5 easy-to-follow steps to complete this challenge.
To have peace of mind and protect our loved ones at our death, it is essential to plan our estate well. Here are five easy steps to complete this challenge.
- Meet a professional
As in many others, the first thing to do is to surround yourself well in this area. In this regard, it is possible to call on the services of different professionals: financial security advisors, financial planners, accountants, tax experts or notaries. The main thing is to have recourse to a person who knows about it and not to our brother-in-law, even if he is convinced that he knows everything… - Take inventory
According to Daniel Plouffe, Director, Wealth Management Solutions, Eastern Canada at Sun Life Financial, the second step is to take an inventory of our assets and debts. This balance sheet must include our properties (homes, land, etc.), our RRSPs and pension funds, our personal-use property (automobiles, motorcycles, etc.), as well as our debts (mortgages, loans, credit card balances, etc.). “We make an inventory of everything that constitutes our assets and our liabilities. When you own a business or a business, it can become complex, hence the importance of calling on an expert,” says Mr Plouffe.
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- Make an estate report
To carry out this assessment, we must first simulate our death… Nothing very cheerful, of course, but it is an exercise that proves to be necessary. “We calculate the impact that the addition of capital from insurance and the withdrawal of amounts due to taxes will have on the estate,” explains Mr Plouffe. - Analyze the gaps
From the net amount obtained in the previous step, you have to start thinking. “We wonder if there is a gap between this situation and the result we would like to obtain, and what are the options that can allow us to achieve our objective,” says Daniel Plouffe. Thus, some will choose to increase the capital and others to reduce the taxes on the succession. The case of a family business that will be bequeathed to only one of the children, for example, is a complex situation. This is where we have to be strategic if we want to be fair and avoid the squabbles of inheritance…
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- Set up a strategy
Our advisor offers us solutions and helps us choose a strategy at this stage. “For example, taking out life insurance adds cash to our estate when we die,” says Plouffe. To reduce taxes payable, it is possible to transfer real estate or an RRSP to our spouse during our lifetime or create testamentary trusts. Every three to five years, or as soon as our situation changes (health problem, death of a spouse, etc.), we must redo the exercise, making the necessary corrections.
Brilliant Ideas: Common Mistakes to Avoid
What are common mistakes made in estate planning? The first is… not to plan anything! “Some people operate on the principle of magical thinking or believe that the state will provide for their loved ones. It is a mistake because the government limits itself to paying an indemnity which can go up to $ 2,500 for the funeral, but that is all, ”warns Mr Plouffe.
Another common mistake is not making special arrangements for our common-law partner. “In the event of death, the law does not provide anything for surviving de facto spouses: they have no particular rights concerning the heritage”, underlines Daniel Plouffe. So that our spouse does not end up with anything, it is essential to make a will that specifies the provisions concerning them, ideally before a notary.
