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Estate Planning: 2 Basics to Giving a Lasting Legacy
In 1940 Nazi Germany’s seemingly unstoppable armed forces were sweeping across Western Europe. They were threatening the United Kingdom. These advances forced the newly-appointed British Prime Minister, Winston Churchill, to confront the ultimate choice: save the British people by making a peace treaty with Adolf Hitler or outmaneuver political rivals at the highest levels of government to rally the nation and fight against incredible odds.
This struggle was beautifully portrayed by Oscar-winning actor Gary Oldman in the 2017 film, Darkest Hour. Winston Churchill’s efforts as a freedom fighter helped save Western liberal democracy. We’ve been given this legacy from all the brave men and women who served, fought and died in the line of duty. On the 11th of November, we remember and honour their sacrifice for us.
A legacy we are given shapes us and how we live our lives both knowingly and unknowingly. Through the values, behaviours, attitudes, traditions, routines we either choose to adopt or reject we shape who and what we become.
For most of us, we think of our legacy as what we leave behind or how we’ll be remembered after we’ve gone. But, your legacy is also something you give for the benefit of others. This is where your estate plan comes in.
Your Will is an Important Foundation
An important foundation for managing your estate is your Will. Be it large or small, simple or complex, everyone has an estate. One helpful question to guide your choices is, “what about my Will is important to me?”
Your Will ensures any assets you own are distributed and any debts you owe are settled. Your Will can also legally specify a number of other requirements. These include ensuring your spouse or partner receive all your possessions, appointing a legal guardian for any minor children, designating any specific bequests to charities and outlining your specific funeral wishes.
Should you die without a Will, the law says you’ve died “intestate”. This means you left no instructions and provincial legislation will govern how your property will be distributed to your surviving relatives. When this happens, a stranger from the public trustee office, not your spouse, may decide how your property will be distributed. There may also be additional time and legal fees required to settle your estate. Essentially you’ve lost control of your estate.
Your Will only distributes assets that you personally owned at the time of your passing. These assets are said to be “inside your estate”. Many other assets may pass “outside your estate” using tools independent of your Will. These tools include naming beneficiaries, using trusts and jointly owning property.
Naming Beneficiaries is an Opportunity
Naming a beneficiary takes just a few minutes to do, costs nothing and doesn’t require help from a lawyer or accountant.
A beneficiary designation is an opportunity for you to name an individual to directly receive your assets. If a beneficiary designation is used, then your estate will potentially avoid having to pay estate administration or probate fees on the value of that particular asset.
Depending on the asset, a beneficiary designation allows certain assets and insurance proceeds to be paid directly to the individual, or individuals, without going through your estate. Assets that allow for a beneficiary designation are registered retirement savings programs (RRSPs), registered retirement income funds (RRlFs), registered educational savings programs (RESPs), tax-free savings accounts (TFSAs), non-registered investments held in a segregated fund and life insurance policies.
Beneficiaries Protect Privacy
Unlike a will — which becomes a public document, available for anyone to see when it goes to probate — naming a beneficiary means that only the person named needs to know the specifics. This may be an attractive option if you’re giving, for example, a large gift of life insurance to a cherished charity.
The decision of who to name as your beneficiary is important, and this decision should be made with regard to your overall estate plan. When both spouses are living, naming beneficiaries can be quite straightforward. But, it can get more complicated for a surviving spouse, if you want to ensure a fair distribution of assets to your heirs. To avoid family conflict, it is crucial that you make good beneficiary choices.
For example, do you want to leave money to someone who is currently a minor? In that case, rather than naming the minor as your account’s beneficiary, you might want to create a “trust,” which is a legal document that defines when and how the minor can receive the money and how the money must be managed until then. You’ll need professional advice to sort out what will work best for you. Start by talking with your financial advisor, who may also suggest bringing in your lawyer to help put the right solution in place.
You’re never too young to make a Will or name your beneficiaries. Your legacy, through your Will and beneficiaries, is a gift that you give that can help to sustain and strengthen those who come after you.