6 Tools for Estate Planning

Considerations of tax planning,  creditor liabilities, keeping Estate matters out of public court documents come into play when deciding whether a certain asset will form part of the Estate or transfer directly to the beneficiary outside of the Estate.

Some legal tools we use to (1) facilitate the transfer of property and/or (2) allow others to act for you (while you are still alive) or for your Estate (posthumously) are:

  1. Your LAST WILL AND TESTAMENT is the document that contains your final wishes for how your Estate will be managed. Distribution and winding up the affairs of one’s Estate must usually take effect by Grant of Probate from the Court of Queen’s Bench (Surrogate), which empowers the named Executor/Executrix to administer the Estate according to the Will. You can only form a valid Will if you are of sound mind. Once you suffer from a significant brain injury or comparable mental illness, you may lose your ability to make a legally binding Will. Considerations of tax planning, managing creditor liabilities, avoiding probate, keeping estate matters out of public court documents etc. come into play when deciding whether a certain asset should be transferred in your Will or otherwise.
  2. Your ENDURING POWER OF ATTORNEY (“EPA”) can take effect immediately upon signing. Most often, an EPA activates as a contingency when you lose capacity to make decisions with respect to your financial affairs. This contingency usually takes place upon certification by a Medical Doctor. Once an EPA takes effect, your Attorney has extensive abilities to act for you. For example, your Attorney would have the power to communicate to different bureaucratic organizations (such as the Canada Revenue Agency) on your behalf. Your Attorney can access your bank accounts, write cheques, mortgage your property, sell your property, acquire property in your name, give gifts, view your Will, and generally manage your affairs. However your Attorney may only act in your best interests. Any misuse of a Power of Attorney could bring about very serious consequences before a criminal or civil court.
  3. In a PERSONAL DIRECTIVE, you name the person who can speak for you, concerning medical treatment, residence, and end-of-life decisions. This document only takes effect if you lose mental capacity to make such decisions.
  4. JOINT OWNERSHIP is a possible arrangement for transfer of property outside of your Estate posthumously. For example, ownership of Land held jointly by two people will  pass automatically by operation of law to the surviving joint owner(s). Joint ownership arrangements often take place with bank accounts, vehicles, and matrimonial real estate.
  5. NAMED BENEFICIARIES on instruments such as life insurance or Retirement Savings Plans can pass outside of your Estate, going directly to the beneficiary named in the contract or financial instrument.
  6. Most TRUSTS activate as a provision of the Will (mortis causa). A Trust is a legal property arrangement wherein property is held by Trustees for the benefit of those named in the Trust as Beneficiaries. This often takes place with a provision of the Will that children or grandchildren can inherit from the Estate; your Executor can use the child’s share of the Estate for her benefit (school fees, and costs of living can also be applied) until the child becomes a certain age, which is most often in the age range of 18-21. You may also execute and settle Deed of Trust during your lifetime (an inter vivos Trust). If you create an inter vivos trust, you can pass property outside of your Estate. Because, inter vivos Trusts are taxed in a particular manner, you should seek accounting and legal advice before settling a trust.