By Dean Dunbar
Many clients come to me wanting to know the difference between a will and an estate plan. These are two very different items.
A will is a legal document, an estate plan contains a will, along with other related documents for final and living wishes.
Estate planning is a process. It anticipates and arranges. It sets out expectations, not only during a person’s life, but also for the management and disposal of their estate both during, and after death.
A good estate plan puts into practice what I call the “Boy Scout Rule”. Be prepared and leave things in a better way than you found them.
While the main purpose of an estate plan is to minimize the income tax and other burdens on the family, it is also there to ensure your last wishes are documented and you have peace of mind.
Let’s look at the basic elements of a good estate plan. These include (but are not limited to);
A will (appointing an Executor, or Estate Trustee), a trust (if one is necessary), a power of attorney for personal care, continuing power of attorney for property, a health directive, possibly a business directive, and final wishes.
I find many of my clients come to me after a significant life event and want to ensure their finances are in order.
We generally begin this conversation with a detailed inventory of their assets. Investment accounts and insurance policies are considered tangible.
I then move on to a discussion about their intangible assets.
Items that include final wishes or directives. This gets many of them thinking about, and realizing, there are vast holes in both their will and their estate plan in general.
Another item that comes up a great deal in these discussions is the topic of probate.
Probate is an approval process that validates your will and confirms the appointment of your executor.
If you don’t have a will or your executor can’t do the job, the courts will appoint an administrator — and the costs will be similar to probate.
One important thing to note: probate fees (which in Ontario is called estate administration tax) and income tax are not the same thing.
In many cases, probate fees can be drastically reduced or eliminated.
Knowing what is expected and how to prepare your various assets, will help ensure you have peace of mind and your executor its properly prepared for these after your death.
Remember, each plan is as individual as you are and the first step to creating a plan is to sit down and have a discussion.
Let’s face it, there is never a “right time” to talk about your death, your will, or your estate plan. These discussions are sometimes unpleasant, but always necessary.
Just like knowing you’ve locked the door when you leave the house, knowing your estate plan is in good order will leave you with peace of mind.
– Submitted by Dean Dunbar, ON, EPC, CEA, Freedom 55 Financial.
