Island Woman - July 2019
The term ‘estate planning’ refers to numerous considerations beyond ensuring your wills reflect your current wishes and POAs (Power of Attorneys) are in place and are realistic. It is prudent to also appoint a contingency POA in the event the attorney is unable to act or predeceases you. A power of attorney can have limited power or full power as if they were you. In the event you become incapacitated, your power of attorney can maintain the day to day responsibilities you may have. You can also give financial power so any investment or other financial decisions can be made on your behalf. A Power of Attorney is not able to give instructions that will benefit themselves – such as naming beneficiaries on registered plans or insurance policies.
Make sure beneficiary designations and successor owners (as applicable) are current at your financial institutions for RRSPs (Registered Retirement Savings Plans), RRIFs (Registered Retirement Income Funds), TFSAs (Tax Free Savings Accounts), and segregated funds. Does your small life insurance plan through work still reflect your ex-spouse as beneficiary? Double check the beneficiary on any annuities, group RRSPs and any term, whole life or universal insurance policies you have in place. In many cases these were done years ago and you could have forgotten to change the beneficiary as your circumstances changed.
Some people try to avoid probate for assets that typically cannot have a beneficiary designation, such as chequing and savings accounts, and individual non–registered investment accounts or a large fixed asset such as their home. An easy method is by naming a joint owner such as one or more of your adult children. As long as you are aware of all of the implications, this could be a solution for you. Joint tenancy (JWROS) –joint with rights of survivorship transfer the property to the survivor outside of estate. This avoids probate fees on this asset and makes the administration considerably easier. It also gives the joint owner you have selected full rights to the asset – they could withdraw funds from the account with their signature alone. If you own a house, your joint owner would have to agree to sell the property or allow you to refinance. By naming a joint owner you are, in essence, gifting half of the value. (with two on title). No one can predict if income tax rules will change and the new joint owner will have to declare one half of the income earned on cash accounts, or, if the original owner will not be able to claim 100% capital gains exemption when they sell their principal residence.
If you have two or more children, and they don’t necessarily agree on everything, it may be prudent for your estate to go through probate. The relatively small probate fee could be well worth while for a large, complex or somewhat difficult family situation go much smoother without any disagreement amongst beneficiaries.