The need for estate planning is often misunderstood and underestimated. There are many misconceptions about estate planning, too. It’s important to understand what estate planning involves so you can determine if it is something you should do.
Contrary to popular belief, you don’t need to be rich for estate planning to be beneficial to you. Estate planning is for everyone. It allows your end-of-life wishes to become reality once you are deceased.
Estate planning doesn’t have to be an uncomfortable, complicated, or unpleasant experience. With the help of an estate planning lawyer, the process can be painless and even pleasant. It’s a load off your mind to know you have done your part to make things much easier for those you love in the event of your absence.
Benefits of Estate Planning
Fortunately for you and your loved ones, Canadian law provides for your end-of-life wishes to become carried out in a legal process. Benefits to estate planning include:
- Peace of mind for both you and your loved ones
- Ensures your final directives are followed
- When planned properly, allows you to avoid unnecessary excess taxing
- Prevents undue stress on your loved ones
Process of Estate Planning
If you reside in Canada, you will want to acquire the services of an estate planning lawyer who is authorized to practice law in Canada. Canadian law does differ from other countries such as the United States where there is an estate tax tacked on. But, in Canada there is a “deemed disposition tax” that applies when you pass away. It is vital to have an estate planning attorney guide you through in order to ensure your wishes are carried out and to be sure your plan is structured in the best, most efficient, manner possible.
In Canada, creating a trust gives you the privilege of transferring your assets while you are still living which eliminates probate costs. If you die without a will, your assets will be divided up and distributed according to how the province or territory you live in deems best.
Taxes and Estate Planning
The term “deemed disposition tax” denotes that your investments are directed to be sold upon your demise. Therefore, any capital gains that result from the sales are included in a last and final income tax return that is filed the year that you pass. Any retirement accounts and income you’ve received from real estate, bonds, and stocks are included as is any life insurance proceeds that were paid in the year you died. The taxation can be brutal but proper advance planning can help prevent astronomical taxation. An estate planning lawyer is an expert on guiding you through the best measures to take.
There are exceptions to the harsh tax penalties that your attorney will use to skirt around the taxation, if he or she does their job correctly. Assets that are left to a surviving spouse can be transferred rather than being sold. Taxes are then deferred even when they are in a trust which provides income for the surviving spouse.
When that individual passes, the assets can be passed on to heirs with a 50% tax on capital gains tagged on. That’s when your estate planning lawyer comes in. Depreciation of property may can be applied. Other measures may be able to be taken as well if your attorney identifies and utilizes them.
Other Details of Estate Planning
There are a number of steps that are advisable when planning your estate. You will want to make a will which directs how you would like your financial affairs carried out. Wills must become a legal document before they are concrete though. Your estate planning lawyer will guide you through the process and legalize your will.
A Last Will and Testament allows you to choose an executor who will oversee your wishes that are stated in your will. Many people think they can leave directives for their funeral or memorial in their will but that is not wise since most wills are not opened until after you are laid to rest.
A Power of Attorney gives the person of your choice the power to manage your affairs in the event that you become incapable of handling them yourself. The affairs may include such tasks as filing tax returns, paying bills, banking, looking after your pets, voting on your behalf, and communicating with lawyers and accountants.
A Living Will is more important than many people realize. It gives your directives as to the implementation of your medical treatment and also gives the person you appoint to have the power to make decisions in your interest. If you are terminally ill, unconscious, or brain dead, your Living Will is your voice when you don’t have one. Do you want to be kept alive through the use of a machine? Do you want to receive intravenous feeding or feeding through a tube? Make sure your wishes now are carried out if you become incapacitated by creating a Living Will.
A trust gives you more power than a will does. It allows you to give more specific directions as to how your estate will be executed. A trust is a legal entity, like a bank account, stocks, real estate investment, or mutual funds that owns the investments you wish to leave your heirs. Trusts are treated as being more binding than wills and also are not subject to the probate procedure commonly incurred after death.
There are different types of trusts. Which one best suits your individual circumstance is best left for an attorney to help you decide.
Estate Planning Lawyer
No matter how large or small your estate is, an estate planning lawyer can help you simplify and optimize your end-of-life wishes so you and your loved ones can have peace of mind, now and in the end.