Here’s How to Plan Your Estate

Some couples decide not to have children and some people never marry. So, in these cases, what happens with your assets after you pass and how can you ensure it all ends up in the right hands? Here’s how to plan your estate so that your money goes where you want it to.

Get a Will 

We can’t stress this enough – everyone needs to have a will and last testament. Having this document ensures that your money is directed to where you intend it to go. In Alberta, for example, if you die without a will, your estate falls into intestacy, and the Wills and Succession Act will decide how your estate is distributed. In the event that you have no children, your entire estate would go to your spouse or adult independent partner. If you are single, your estate is then divided equally between your parents or goes to the sole surviving parent. If your parents are already deceased, that money then passes onto your siblings. And those without siblings will have the estate equally distributed to the paternal and maternal grandparents or their descendants. Sounds easy right? Not necessarily. It gets complicated if you’re separated from your spouse. The estate could technically get passed onto a former spouse, even if you are in a new relationship. As you can see, dying without a will can be complicated and can put an unnecessary burden on your loved ones. Having an up-to-date will can solve this problem.

Choose a Trustworthy Executor

It’s also important to find a trustworthy executor who will ensure that your will is administered and distributed properly. It’s a complicated and time-consuming job, so if you have no children, you might want to designate a family member or friend who does not have a financial stake in your estate and understands the legal process. It’s also wise to hire an accountant or solicitor as a second executor who has specialist knowledge and knows their way around legal and tax issues.

Donate “In-kind”

If you want to leave some of your estate behind to a charity, the best way to do this is to donate the stocks and bonds “in-kind”. This effective tax strategy will prevent your estate from having to pay taxes on the gains while making sure the charity will get the total value of the asset along with a tax receipt. If your investments have lost value since you purchased them, it’s better to sell the instrument and donate the cash so that your estate can offset gains elsewhere. In the event that you plan to donate more than $1 million, it’s best to set up a foundation that can manage the money for you even after your gone.

Leave RRSPs to a Spouse or Charity

Upon death, RRSP amounts are automatically transferred tax-free to your spouse. But if you’re single, that amount would be considered taxable income to the beneficiary and to your own estate. This could cause a heavy tax bill for your estate and your recipient. In this case, it might be best to leave the RRSP amount to a charity, which would trigger a tax reduction totaling as much as 100% of your net income in the year of your death. 

These are just a few effective strategies that can be used to ensure your estate is distributed as you intended, and prevent tax implications for your beneficiaries. To learn more and to set up a well-defined estate and succession plan, contact us at The Beacon Group of Assante Financial Management.