Estate Planning

Allegiance Wealth Management

Estate planning while you are alive ensures your personal property is managed effectively and that your wishes, such as distribution of assets, are carried out following your death. It also provides direction on how to care for you and your assets in case you become unable to deal with your own health or financial affairs.

Estate planning is not only reserved for the wealthy. Settling even a small estate requires an executor who can ensure proper care of your assets and liabilities. Estate planning provides direction to your family and can help minimize taxes paid at death and reduce probate fees.

Protect yourself with a living power of attorney (living will)

What happens when you are incapable of making decisions for yourself? If you haven’t made arrangements for someone to legally act on your behalf, a court will appoint someone. This can be time consuming, expensive and it is likely someone will be appointed who does not understand how you would like your affairs managed. You may want to have a lawyer draft a living will that specifically meets your needs and circumstances.

Last will and testament

  1. Having a will

    When you die, you leave all future decisions regarding your estate to someone else. A will is your way of providing direction on how you would like your estate settled. Among other actions, you will assigns and executor, provides direction on the management of your assets, recognizes charities and individuals, and nominates guardians for your children.

  2. Not having a will

    If you die without a valid will, a court will assign someone to administer your estate and distribute assets according to a formula set out in provincial estate laws. This can cause long delays in settling your estate. If your thoughts on beneficiaries, distribution of assets, etc. are important, you will need a will.

  3. Choosing an executor

    Choose carefully. Your executor will be your representative for settling all aspects of your estate – final taxes, funeral arrangements, settling liabilities, dispersing assets, etc. While this individual will remain the final decision-maker on your behalf, he or she can hire the assistance of an estate professional, such as lawyer or a trust company. This professional adds experience and efficiencies performing the executor’s administrative responsibilities, such as arranging the funeral, looking after assets and debts, making arrangements for living family members, making household arrangements, settling taxes and probate of the estate, etc.

Probate fees

When you die, your estate is subject to probate fees. Provincial probate courts charge probate fees to declare your will valid, confirm your executor and provide evidence of your death. Probate fees are based on a percentage of the value of your assets at the time of death and vary by province.

There are certain assets that bypass the estate probation process, and they are such as life insurance proceeds to a named beneficiary, RRSP and RRIF assets held with a life insurance company with a named beneficiary, and any jointly owned assets like your own residence.

Lack of liquidity

Not sufficient in available cash in an estate plan can sometimes cause problems and can cost the estate many dollars. To pay final expenses, your executor may need to consider selling assets quickly – possibly below market value and with costly transaction fees.

Tax liabilities on death

Tax can be significant – especially if you do not have a surviving spouse. Capital gains on stock portfolios, property other than the principal residence (i.e. cottage) and full account balances from RRSP/RRIF accounts must be included in your final tax return as income. Probate fees owing can also be costly, depending on the province.

Your estate plan needs to consider how these expenses will be paid. Many people use life insurance coverage as a means to produce liquidity and cover the costs of final expenses. The death benefit is usually received tax-free and can eliminate the need for the executor to sell estate assets.

Your estate plan

An estate plan is made while you are alive. It must be flexible to adjust to changing laws or family circumstances. Please contact one of our advisors to establish your estate plan.