Key estate planning documents include:
- Will — outlines your wishes regarding the distribution of your assets upon death, appoints the executor of your choice to administer your estate and distribute assets to your beneficiaries, and nominates guardian(s) of any minor children.
- Power of attorney (POA) for property — empowers a trusted individual(s) of your choice to make decisions relating to your property and finances while you’re alive but unable to make decisions for yourself.
- Power of attorney (POA) for personal care (depending on the province or territory can also be referred to as Representation Agreement, Personal Directive, Health Care Directive etc.) — empowers a trusted individual(s) of your choice to make health care decisions on your behalf while you’re alive but unable to make them for yourself.
- Living Will — may accompany a POA for personal care and details your medical treatment wishes.
- Beneficiary designations — facilitates the transfer of certain assets, such as registered accounts and life insurance policies, directly to a named beneficiary outside of your Will.
It’s never too early to start working on your estate plan. POAs are particularly important if you become temporarily incapacitated or chronically debilitated – which can unfortunately happen at any time. In those cases, having a POA for personal care ensures medical decisions can be made on your behalf in a timely fashion, while a POA for property ensures your financial affairs can continue to be managed. If you pass away unexpectedly without a Will in place, your estate distribution will generally be dictated by your province or territory's intestacy laws, which may not align with your desired distribution objectives. While designating a guardian for a minor child in a Will does not necessarily guarantee court approval, the court may give special consideration to parents' preference of guardian(s) in their Wills when determining a child's custody. Beyond denying you a voice in what happens, intestacy can lead to additional delays, complications, a heavier administrative burden, and disputes among family members.
Building an estate plan can feel overwhelming, and having a trusted team of professionals to help you navigate any intricacies is indispensable. Your team of professionals can include:
- Estate planning lawyer— provides legal advice and drafts legal documents.
- Tax professional— recommends steps and structures that may reduce taxes liabilities at death.
- Financial advisor—verifies that your investments and named beneficiaries align with the estate plan your lawyer and tax professional outline for you.
A POA for personal care is generally only effective when you lack the capacity to make health care decisions for yourself. By contrast, you may get to dictate when your POA for property becomes effective. For instance, some people may choose to make their POA for property effective as of the signature date without extending its use to periods of incapacity. Others may only want to activate their POA for property when they are mentally incapable of making decisions for themselves. A POA can also be effective immediately while enduring periods of incapacity. Since POAs are catered to your specific circumstances and needs, it is crucial to determine what authority you want to give to an individual acting on your behalf and when you want that authority to be activated.
Some people may have a Will that contradicts named beneficiaries on registered accounts and life insurance policies. To ensure your estate is administered according to your wishes, your documents must align and support each other. When you update one estate planning document, review all other documents that could be impacted by your revised estate plan, and if necessary, update them to help ensure consistency, avoid confusion and disputes amongst loved ones.
Having regular conversations with your loved ones who will play a role in your estate plan can help them better understand your wishes, clarify each person's role in the process and make them aware of any elements that might increase the complexity of the administration of your estate. It’s especially important to verify whether your named executor(s), person(s) designated in your POAs and guardian(s) of minor children, are willing and capable to take on this role. If either of these individuals cannot or is unwilling to act, when necessary, a court appointment may be necessary, which may not align with your wishes and can lead to additional delays and complexity for your loved ones. When you make changes to your estate plan, you may consider updating anyone who is affected.
Once an executor is appointed, that person should not only be familiar with the person's financial affairs but know where financial records and other important documents are kept. This can help make the job easier and help ensure beneficiaries receive bequests in a timely fashion. When planning for your estate, don't forget to address your digital footprint, which can include everything from online accounts and social media profiles to cryptocurrency wallets and other digital assets. Accounting for these assets in your estate plan will enable your executor to access and manage these assets after you pass away, which will help with distribution being completed in a timely manner.
Life changes, and so do laws, and your final wishes and estate plan may be impacted. Events such as marriage, divorce, the birth of children and death can affect your estate plan. It is important to review your plan annually or any time there is a major life event or legislative change to help ensure documents are aligned, up to date and accurately reflect your wishes. You also shouldn't forget to regularly verify whether key players named in your estate documents are still willing and able to fulfill their responsibilities.