Money & Career
6 steps to safeguard your family's future
Money & Career
6 steps to safeguard your family's future
A will lists basic details about how you'd like your assets to be divided. It should name an executor (the person who carries out your wishes), and a guardian if your kids are under the age of majority. There are three types of wills: formal, which is accepted in all provinces and usually drafted by a lawyer; holograph, which is handwritten and not accepted in all provinces; and notarial, which is valid in Quebec only and completed by a notary. Spouses should have separate wills.
Tip: A formal will can be drafted with a do-it-yourself kit, but make sure it suits your situation and is valid in your province. A trip to the local library will help you get started. Look for books written specifically for Canadians that offer step-by-step instructions and examples on how to customize your will.
Why you need one: Without a will, your assets will be sold and the proceeds divvied up according to provincial laws, and your estate can't be distributed until the court appoints an administrator (which means you've missed the chance to pass on special gifts to specific people). There will also likely be frustrating delays, extra paperwork and other costs and inconveniences, such as court appearances and legal fees.
What you may not know: Even if you have a will, you can't just distribute your finances as you wish. If your hubby died and forgot you and the kids in his will, family law courts in British Columbia and Ontario could step in and change his will to meet support obligations.
Many signed contracts, such as pensions and insurance policies, aren't included in your estate if you've already listed a beneficiary. These items could bypass your will altogether.
Joint property, such as the family home, usually goes to the surviving owner.
Ka-ching!: Costs vary from $400 for a basic will and powers of attorney (see below). If complex, a lawyer will charge by the hour, between $200 and $600, although the average cost is about $400. Do-it-yourself kits range from $10 to $150. If you're uncomfortable you may want to go to the pros.
The talk: You may want to divulge the details of your will to your immediate family in advance. Write down key points you want to go over, set a time and explain the subject of the meeting. Follow up to ensure everyone understands your wishes.
When to update: Every few years or earlier if your financial situation changes; the names of beneficiaries, executors or guardians change; or after any major life events, such as a birth or divorce.
2. Estate Plan
An estate plan is the umbrella under which every aspect of your estate falls -- will, powers of attorney, finances, insurance and taxes. “It can include personal-care preferences while you're alive, terminal-care wishes, organ donations and funeral arrangements,” says Marty Kobayashi, a financial adviser in Toronto. “It helps preserve money for your heirs by minimizing taxes and designates people to carry out various duties.”
Why you need one: “A good reason to plan with family, not in secret, is to avoid the horrific family-busting process that goes on when siblings are fighting over an estate,” says Peter Mogan, a corporate lawyer in British Columbia and author of Family Trusts for Estate and Tax Planning (Self-Counsel, 1996).
Ka-ching!: Estate-planning specialists (lawyers and financial planners) charge a flat rate or hourly fee from $150 to $600 (a small price to pay if they end up saving your heirs countless headaches and a whopping tax bill). Some lawyers include a simple estate plan with the price of a will (about $400). Banks, insurance companies and investment dealers will often coordinate your plan for free -- if you buy insurance or other products from them that pay commissions.
The talk: “It's better to have frank discussions with your family about your wishes before anything happens to you rather than leave decisions to others in a time of crisis,” says Ian Shulman, a clinical psychologist in Oakville, Ont.
When to update: If you're making any revisions to your will, powers of attorney and insurance policies, update your estate plan, too. Otherwise, check every few years to be sure the details reflect your current situation and wishes.
3. Powers of Attorney
Powers of attorney (POA) -- known as “mandate” in Quebec -- provide someone with the legal ability to make decisions for you. In Ontario (each province has slight differences), a POA covers three general areas: continuing property and financial decisions; temporary property and financial controls (valid for a set period; expires if you lose capacity); and personal care. You can cancel or change your POA any time. All POAs become active as soon as you sign them, unless you state otherwise, and end with your death.
The people you choose should be those you trust completely because they will instantly have authority to access your bank accounts and finances and, on the personal-care side, to make decisions for your well-being and quality of life. Ideally, POAs should live close by because they may need to look after your home, pay your bills or talk to your doctor.
TIP: Be sure to spell out what each person is responsible for and how potential disagreements will be resolved.
Why you need it: In the case of an emergency, such as an accident, your POA for personal care makes important decisions on your behalf, from treatment choices, such as no life support, to personal preferences, such as a private room. She would continue to do so if you lost capacity, such as in a coma. Without a POA for personal care, doctors usually get instructions from next of kin. For financial matters, you need the legal authority of a POA. The individual can then do your banking, sign important documents, make investments and even sell your home. Without one, no financial institution will release your funds, even if your unpaid bills are piling up. Someone would have to apply to the courts to be appointed your guardian and prove that you are incapable of managing your affairs.
Ka-Ching!: In Ontario, the attorney general's officeprovides free do-it-yourself forms with detailed explanations for completing them. You can also find forms at the library for free or at office supply stores and online at a cost of $20 to $80. Look for documents prepared by a legal professional and make sure they are suitable for your province. Lawyers charge $100 to $350 for POAs, although some include this service with the cost of preparing your will.
The talk: Make sure your designated POA accepts the responsibility. Clearly explain to your POA what's involved and expected. Even if the person is your spouse and you think he knows exactly what you'd want, go over personal-care choices and preferences. Explain your reasons to other family members if you're choosing one sibling or child over another.
When to update: If your health changes, you move out of province or change your mind about the named person or if she is unable or unwilling to do it.
An executor -- known as a “liquidator” in Quebec -- follows directions from your will and distributes your assets after paying your bills. Ideally this is someone you trust and who knows your personal situation; she may be a friend, family member or, sometimes preferable, an objective professional such as a trust company employee. You can name more than one person, but the individuals should live close to where your estate and property are located. Once an executor is appointed, it's difficult and costly to remove her, so consider the following before naming one.
• Does your estate involve eccentric or mundane duties?
• Will your executor have to run your business or find a home for your pets?
• Is she able to travel if you own a business or property elsewhere?
• Do you have straightforward gifts to be handed over or complicated trusts to manage?
• Conflicts of interest may disqualify family members, brokers, investment advisers and business partners.
5. Legal guardianship
If you have children under the age of majority, appoint a guardian -- known as a "tutor" in Quebec -- in your will. This is particularly important if you are a single parent. A guardian is legally responsible for your children's welfare and property until they reach the age of majority, which differs from province to province. You can name more than one guardian: give one person control over finances and the other one custody. Once your children are adults, they do not need a guardian.
TIP: If you have a child with a disability, look into testamentary trusts, knows as "discretion" trusts in British Columbia and "Henson" trusts in Ontario. These allow your child to qualify for disability benefits if he is unable to work when he reaches the age of majority.
Why you need one: If you and your spouse die at the same time, who will care for your kids? Until a guardian is appointed, your children will not have access to your estate funds. Guardians are not paid to raise your children, but many parents will leave a lump sum or ongoing payment for the guardian in their wills, which includes costs for the child's care.
The talk: Talk with your spouse or, if you are a single parent, other family members. Consider who you'd want to take on the role of guardian and who's willing.
When to update: If you and your spouse experience serious health changes. When reviewing your estate plan and wills, ensure the appointed guardian is still the best choice. Also consider major changes, such as schooling choices, and events in the life of your guardian, such as divorce. The guardian's legal responsibility ends when your children reach age of majority.
6. Final arrangements
Funeral arrangements are highly personal and usually guided by your spiritual beliefs. Preplanning a funeral often involves listing your preferences, such as burial or cremation, or prepaying for a service.
Why you need it: Preplanning allows you to make the call on the final arrangements for your remains. (At the simplest level, it's a chance for you to make sure there's no Barry Manilow soundtrack at your farewell fête.)
Ka-ching!: A traditional service followed by burial or cremation in Ontario ranges from $5,000 to $7,000. Cremation is about $512 (plus a container charge, ranging from $130 to $550). Costs vary by province; providers are required by law to supply detailed price lists, so you only pay for what you want. Preplanning contracts should outline all products, services and religious needs. You may also hold a service in your home.
The talk: Outline your final wishes to loved ones so they know what to expect before the time comes.
When to update: If your situation changes, revise both your funeral service and cemetery plans. It can often involve a fee.
|This story was originally published in the September 2007 issue. |
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