Not many people enjoy thinking about how to distribute their assets once they pass away, but it’s worth considering in order to leave a legacy among your family members.
Not properly planning for your estate could leave things a mess when you eventually pass away, and make things complicated (and expensive) to sort out.
Making Financial Decisions
Most people think of estate planning as making their own financial decisions, but what if you are no longer able to make difficult financial decisions on your own?
In 2011, almost 10% of citizens over the age of 65 had Alzheimer’s disease or some other form of mental disorder. People suffering from mental illness will need a loved one to make financial decisions for them.
What many people don’t realize is that delegating someone to make financial decisions for you in the event you aren’t able to doesn’t mean you automatically lose that ability. The delegated person isn’t allowed to make decisions for you until it is legally proven you are unable to make decisions on your own. The delegation is done via power of attorney and involves you deciding what you want your family member allowed to decide in the event you aren’t able to make the decisions on your own.
Mental illness isn’t a happy topic but it’s important to discuss delegation of financial decisions in the event it happens. Doing so sooner rather than later means you’ll be protected in the event you become ill later on in life.
You Need More than a Will
Everyone knows it’s a mistake to die without a will, but almost everyone thinks a will is the one document they need to ensure their assets get distributed properly when they die.
Along with a proper will, assets also get distributed by naming someone as a beneficiary (such as in a life insurance policy) or on significant financial assets such as an RRSP. Naming someone as a beneficiary can be done within your will but don’t need to be put in there so long as the person is named within the insurance documents.
Your chosen method of ownership of your large assets also can dictate who gets what when you pass away. This is called joint tenancy with the right of survivorship and basically means that you own an asset jointly with someone else and when you pass away the other person will obtain full ownership. A common example is when you own a home with your spouse.
With that being said, it’s also very important that you have a current and valid will in the event something tragic happens.
Customizing Your Will
Everyone has their own unique set of financial circumstances and a unique family situation. A will is your opportunity to decide exactly how your assets will be distributed and there is no set formula to decide that.
In general when someone passes away with a spouse and no children, the entire estate will go to the surviving spouse. If there are children involved then the legislation dictates the distribution among the family members. If there are no children and no spouse, the assets get distributed to his/her parents, then siblings.
This order of distribution may work for some, but likely doesn’t work for you. Relatives you may not know (or get along with) might receive an inheritance, and laws don’t fully recognize common-law spouses when it comes to distribution of assets. Also, children who aren’t old enough to receive an inheritance might mean the government gets the money until the child is an adult.
Whatever the case may be, your situation is unique and needs to be treated as such because a generic will likely won’t distribute your assets the way you would like.
Conclusion: estate planning is important for everyone and having a will simply isn’t enough. Considering whether you’ll need to designate someone to make financial decisions for you, filling out the required insurance documents that list your beneficiaries and customizing your will to your own personal situation are all important steps many people miss.