Graphic by Lucy Barco

The must-haves of estate planning

By  Carla Figliomeni, Catholic Register Special
  • November 6, 2016

Whether you are reviewing your current estate plan or considering a plan for the first time, there are several definite “must-haves.” Here are five of them:

Appointment of an Executor

Appointing an executor is an important consideration. The executor of the estate is responsible for a large number of complex tasks, such as gathering estate assets, selling estate assets, paying debts and distributing your estate among the beneficiaries.

You can appoint one or more executors, or alternate executors. The executor can be a friend, a family member or a professional trust company depending on your circumstances and the complexity of your estate. You will want to choose someone you trust. Consider the person’s age and level of sophistication with financial matters. You should also ensure that your Will contains the powers and authority necessary for your executor to act in relation to both your personal and business assets.

Provisions for Dependents

In Ontario, a testator is generally able to bequeath his or her estate in whatever manner he or she wishes, but if you have dependents you should consider how the distribution of your assets will affect them. This is because your estate could face a challenge under the Succession Law Reform Act (Ontario) if the deceased has failed to adequately provide for a dependent.

In such a case, the court may provide for a dependent out of the estate assets and out of assets which would otherwise not form part of the estate, including amounts payable from an insurance policy or a registered retirement savings plan, a gift made in contemplation of death and property held jointly with another prior to death. The court can “claw back” these assets and deem part of the estate for the purpose of considering the application for support.

Tax and Probate Planning

Your estate planning should include strategies to minimize taxes and other fees that may be payable on your death or as a part of administering your estate.

On death, the Income Tax Act (Canada) deems you to have disposed of all your assets immediately before death at fair market value. This deemed disposition can result in significant capital gains taxes, and sometimes with no actual liquid assets to satisfy them. Proper planning can help defer such deemed dispositions depending on your circumstances. Charitable giving can be an effective way to reduce your estate’s tax burden.

In addition to income tax liabilities, most provinces charge a fee (a probate fee) to obtain a Certificate of Appointment of Estate Trustee (with or without a Will). Generally, an executor will not be able to sell a deceased’s property or access bank accounts without such a certificate.

In Ontario, the probate fee is up to 1.5 per cent of the value of the estate, so planning to limit probate fees is important. One way to minimize probate fees is through multiple Wills. A second way is to have certain assets, like registered retirement savings plans and life insurance policies, pass outside of your Will by naming a beneficiary.

Flexibility for Charitable Giving

Charitable giving is a great way to benefit a charity or cause you care about with the added benefit of reducing your estate’s tax burden. Charitable giving can be in the form of a legacy in your will or an addition to a fund established during your lifetime. However, if you are going to make a charitable bequest, you should ensure the following is included in the language of the bequest: the correct legal name of the charity and its registered business number; and an amendment/variation clause to the gift in the event that the charity has ceased to exist or to operate, or if it is no longer possible to carry out all of the terms of the gift.

You should not add conditions to a gift unless you have discussed these first with the charity.

Powers of Attorney for Property and Personal Care

There is a misconception that estate planning only deals with what happens to your assets on death, when it should also address any future incapacity. For example, who will pay your bills and have access to your banking if you are incapable of managing your own affairs?

By executing a power of attorney for property, you can name someone to make financial and legal decisions on your behalf should you become incapable, without the need for an expensive court order to appoint someone. This person should be someone you trust: a close friend or family member or even a trust company.

Similar to your financial affairs, a power of attorney for personal care assigns the power to make decisions about your personal care and health care in the event you lack mental capacity. These decisions can include decisions regarding where you live, and decisions to consent to, or refuse to consent to, health-care matters from routine tests to major surgery.

(Figliomeni is a lawyer who focuses on tax and estate planning in Miller Thomson’s Private Client Services Group in Toronto.)

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