What will you do about you estate when you pass or are still live? When you’ve decided to pledge your life and love to another person in marriage, you have to think about what’s ahead for your future together. Where will you live? Will you start a family? What happens to your individual and collective assets? This is true no matter where you spend forever, including Canada. One of the things you and your spouse should discuss is estate planning and who gets your assets when you pass on.
Deferring Taxes
While Canadians don’t have to deal with an estate tax like their neighbors to the south, they have to face a deemed disposition tax. Any investments that you have are sold after your death, triggering this tax, which is included in a final return. That taxation can be quite significant. You have the option of transferring your assets to a surviving spouse, which defers this tax. This can save your partner a considerable amount of money if these assets are placed in a living trust.
Taking Care of Business and Your Estate
It’s important for you to have a will to make sure your assets are handled according to your wishes after you die. This is especially true if you leave a spouse and children behind. Without a will, the province you lived in gets to decide how your assets are distributed among the people who survive you. The lack of a will can also lead to unnecessary expenses and delays. The court assigns administrators to serve as executors of your estate. The process can be especially lengthy when there are minors involved, as a bonded guardian must be appointed to handle distributing your assets.
Demystifying the Documents For Your Estate
We’ve already mentioned a living trust and a will as must-haves for estate planning. Let’s take a closer look at these and other documents that help you get your affairs in order.
- Last Will and Testament: This document provides guidance to your executor on how your possessions should be distributed. A will doesn’t include instructions for funerals and burials, as it is usually read afterward in the presence of your beneficiaries.
- Living Trust: While a will transfers assets after you die, a trust does so while you’re alive. It is more legally binding than a will, and it avoids the probate process that can be costly.
- Power of Attorney: Many Canadian couples pledge to stick together in sickness and in health. If you’re ever incapable of managing your affairs, the power of attorney designates a person to manage certain activities on your behalf, including paying bills, voting, filing taxes and making financial decisions. If you want your spouse to make key decisions should you become incapable, the power of authority legally authorizes him, her or them to handle your business.
- Living Will: A living will outlines your wishes for medical treatment and healthcare decisions when you’re unable to communicate them. It also grants a person medical power of attorney to make decisions if you’re in a coma, terminally ill or otherwise unable to convey your wants.
Each of these documents makes specific provisions for getting your affairs in order, both in life and death. It’s important to wrap your arms around these documents, especially if you’re contemplating marriage and starting a family.
Avoiding Probate
The probate process was mentioned when talking about a living trust. Probate involves verification that the last will is valid and cannot be contested. There are significant costs associated with the probate process. A living will eliminates the probate process, but there are other options worth exploring, such as making tax-free gifts of your assets before death. It is recommended that you discuss your options with an estate planning professional.
Tying the knot marks a major milestone in your and your partner’s life. As you contemplate your shared future, it’s important to plan and prepare for “in sickness and in health, till death do you part.” Having the necessary documents completed can save you and your loved ones time and money.
