Estate Planning 101

For many family members, the decision to disperse their assets, such as the family home, can be filled with diverse emotions. Taking the time to first have a conversation with your family members about their expectations and desires and then creating a clear and legally binding plan will ensure everyone's wishes are respected.

The Three Primary Ways to Pass A Home Down:
1. Selling to a family member.
2. Gifting to a family member while you are still living.
3. Bequeathing to a family member after your passing.

Each option has pros and cons and can vary by province. Always check with a a qualified financial professional and attorney to ensure your rights, as well as those of your family members, are protected and that all laws are followed. 

Last Will and Testament
This is a legal document that states how your assets should be distributed. It can also name an executor of your estate as well as a guardian for your children. This can be done on your own, but should be signed in the presence of two witnesses who will not benefit from your estate. It becomes effective upon your death and must go through probate court.

Trust
There are two primary types of trusts - inter vivos aka living trust and testamentary trust. It's important to note that laws may vary by province.1 The main benefit trusts have over wills is that trusts do not need to go through probate court; therefore, assets can be distributed faster. Consult your financial planner or attory to learn which type is best for you and your family.

The 21-year Rule
Under the Income Tax Act, trusts are generally deemed to dispose of their property 21 years after their creation. The trust is considered to have sold all its assets at once and all the unrealized gains on the trust property are taxed.2

Your Estate Planning Checklist
These are some of the things you need to have documented to ensure your affairs are in order and your final wishes carried out.

1. Last Will and Testament or Trust
2. Executor of Your Estate
3. Beneficiaries of Your Estate
4. Guardians for Minor Children
5. Beneficiary Designations
   1. Canadian Registered Retirement Savings Plan and Tax-Free Savings Account
   2. Bank accounts
   3. Life Insurance policies
   4. Pensions
   5. Stocks/investments
   6. Other financial accounts
6. Healthcare Directives (including end-of-life care instructions)
7. Power of Attorney
8. Proof of Identity
   1. Social Insurance Number that is on an official card or letter
   2. Driver's license
   3. Birth certificate
   4. Marriage license
   5. Divorce decree
   6. Passport
9. Homeownership
   1. Title
   2. Property deeds
   3. Mortgage papers
10. Funeral Plan (service wishes, cremation and burial preferences, etc.)

N.B. This information does not constitute financial advice. Always consults a trusted financial services professional or attorney regarding matters related to this subject.

Sources:
Buffini & Company
1. canada.ca/en/revenue-agency/services/tax/trust-administrators/types-trusts.html
2. nbc.ca/personal/advice/taxes-and-income/family-trust-advantages.html

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