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Who enjoys thinking about suddenly dying? No one. We hope we never have to experience such a thing. But since it could happen—perhaps we've seen it happen to friends or family—we need to be prepared, which means drawing up a will. Dying without a will leaves provincial or territorial law to determine how assets will be distributed, and that won't necessarily jibe with your wishes, says Richard Niedermayer, a partner and estate lawyer at Stewart McKelvey in Halifax.
If you already have a will, when's the last time you gave it a once-over? Niedermayer recommends looking at your will every three to five years, or whenever life circumstances change. "Make sure the will still reflects your wishes," explains Niedermayer. The birth of a new child, for instance, means adding the little one to your will, not to mention naming the child's guardian. If you're going through a divorce, you'll likely want to remove your spouse's name or change your executor.
Power of attorney
Incapacity is another misfortune we don't want to contemplate—but we really should. Statistics show that we're more likely to become seriously injured or disabled than die suddenly, notes Mark Halpern, a certified financial planner and president of Toronto-based IllnessProtection.com. Power of attorney (known as mandate in Quebec) gives a person of your choice the ability to make important decisions for you when you can't make them yourself. You'll need to work with your lawyer to draft two separate powers of attorney: one for all your investments, real estate, banking and other assets; and one for medical decisions, such as whether to administer a life-prolonging treatment.
Most of us have some form of life insurance. But how much is enough? It depends on what the money is for. Do you simply want to pay off a mortgage, finance funeral arrangements or settle a debt? Or do you want to help out the loved ones you'll be leaving behind—perhaps pay for your children's education or maintain the family's standard of living? In any case, get a proper insurance analysis from an accredited financial planner who can help you understand the issues, says Halpern.
Start your search by checking out the Financial Planning Standards Council website at fpsc.ca. A planner can also review other applicable products, such as disability and critical illness insurance, based on your individual needs.
Like your other documents, insurance coverage should be revisited with every life change. Buying a house equals a new (and possibly bigger) mortgage to pay off, meaning there's more to insure, notes Halpern. On the other hand, losing your job might require you to adjust your insurance slightly so that you can continue to afford the premiums.
If you have an employee pension or any investment accounts, such as an RRSP or TFSA, ensure that the beneficiary is up-to-date. "A lot of people have their parents as their beneficiaries; they never changed it when they got married," says Halpern.
Finally, ask yourself if your family knows where to find your important papers. They may not have a clue where documents are kept, or even know they exist, says Halpern. "Your heirs should know where to find bank account numbers, computer passwords, the names of your trusted advisers, lawyers and accountants, [and] the location of the key to your safety deposit box."
For more money tips, Check out Gail Vaz-Oxlade's adivce on money management.
|This story was originally titled "Estate Update" in the March 2014 issue.|
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