It is a myth that you only need an estate plan if you are wealthy and own a business.
Estate planning is an essential task if you have assets to your name as it can protect not only these assets but the beneficiaries you wish to leave them to.
At Spectrum Family Law in Vancouver, we have assisted countless individuals in creating an executable estate plan for the future.
In this essential guide to estate planning, we share what we have discovered about the importance of estate planning, as well as how to go about it and what a good estate plan should include.
Why do I need an estate plan or a will?
Consider what could happen if you do NOT have an estate plan:
- The law will assume you made no choices of beneficiary, meaning that you may end up paying more taxes on the assets you leave behind
- Your assets will be distributed according to local BC laws
- Your surviving family members may need to handle the administration of your estate, regardless of their experience in such matters
Your estate plan does not have to be intricate. It can be a relatively simple document based upon your wishes and your preferred distribution of assets.
Without an estate plan, however, you may be leaving difficult financial problems behind for loved ones.
What is estate planning in British Columbia?
Estate planning is more than simply deciding on how to distribute your assets.
It’s about how and when to do this tax effectively so that more of what you leave behind ends up with the loved ones who are the beneficiaries.
So, you will need to consider the following when estate planning:
- The financial (and other) needs of surviving family members
- Your financial, contractual and moral obligations
- How will your business be passed on?
- How to minimize tax in what you leave behind
- Are all your assets in BC or do you have interstate assets?
A complete estate plan may also include incapacity planning, so that there are detailed instructions for how to manage your financial affairs in the event of mental incapacity.
For some people, looking to the future can be challenging. Nobody knows what the future will hold. However, with the help of experienced estate planning lawyers, informed decisions can be made.
Why get started with estate planning?
If you have assets to your name, it is never too early to get started with estate planning. But it can be too late.
Most people are motivated by a combination of practical and emotional reasons.
If you want to protect loved ones after you’re gone, and don’t want to see your life’s work eaten up by unnecessary taxes, a well-executed estate plan can help you do that.
It can enable you to take steps to pass on what you have accumulated during your life to the family members who you’d like to see benefit from them – without confusion, stress, or conflict for them.
It can ensure that your creditors are all paid and your family members are not left with any of your debts to pay.
It can help you protect others, like staff in your business or close friends, who might otherwise face difficulties if you are no longer around.
Estate planning may also be an opportunity to leave another type of legacy. Many people want to make charitable contributions to leave behind a portion of what they’ve made to improve society at large.
For most people, it provides peace of mind that assets will reach the intended beneficiaries.
Who can you appoint as your estate trustee in BC?
One of the most important decisions you will make is who to appoint as your estate trustee.
This is the person (or people) who you name in your will to take care of your financial assets after you have passed away.
Usually, this is:
- A spouse
- An adult child
- Another relative
- A friend
- A lawyer or financial advisor
- A trust company
Responsibilities of the appointed estate trustee
Whoever you appoint as a trustee has significant responsibilities, including:
- Arranging the funeral and burial
- Confirming that the Will appointing the estate trustee is the last Will
- Identifying the beneficiaries and notifying them of their interests in the estate
- Creating a complete inventory of assets, along with their values
- Maintaining proper accounts
- Determining any debts owed by the deceased (including taxes) and settling or contesting them
- Acquiring legal advice on the administration of the estate, if necessary
- Opening an estate bank account, if necessary
- Administration of any applicable trusts established by the Will
- Distributing assets correctly according to the Will
Developing your estate plan
If you are yet to start on your estate plan, follow these steps for an executable plan that serves you in the future:
Step 1 – Consult your advisors
Make sure that you have the right team of people advising you.
Generally, this will be an estate planning professional like a lawyer, financial advisor or accountant.
If you have a business, your estate planning requirements may be more complex and you may need to involve a business valuator, advisory board or family council in your decision-making.
Step 2 – Determine the goals of estate planning
What do you want your estate planning to achieve?
Talk your main goals through with your chosen advisor(s) and communicate clearly what your expectations are.
Most likely, practical and financial goals for you and your family will need to be balanced with other less-tangible goals like achieving protection and peace of mind for loved ones you leave behind.
Step 3 – Share your plan with your family
This is an important step in estate planning that some people miss. It can be a difficult subject to discuss but the input of your family members may be important.
Make sure that people will receive the assets that they actually want and value. For instance, if you wish for your business to continue when you’re gone, there is little point in leaving it to a family member with no interest in running it.
Bear in mind that if you are leaving assets to young children, you may not want to share this information with them until they are older.
Step 4 – Implement your estate plan
To implement your plan and make it executable, it will need to be drawn up by a professional lawyer, accountant, financial advisor, or other qualified professional.
Otherwise, you may be creating more problems for the family members you leave behind.
Step 5 – Monitor your plan
An estate plan should not be fixed in stone and there should be plenty of room to make adjustments. The younger you are when you make your plan, the more important this step is.
Treat it as an annual plan that is reviewed regularly. As circumstances change, adjust your estate plan and make sure that any changes are legally enforceable.
Tools for creating an effective estate plan
Your will details how your property will be distributed upon your death and names an executor to look after your estate. Find out more about creating wills in British Columbia here.
Power of Attorney
Enduring power of attorney empowers a person you trust (usually a close family member) to legally make financial decisions on your behalf, if and when you’re no longer capable of making these decisions. More information can be found here.
Trusts are a useful estate planning tool if you want somebody else to enjoy the benefits of your assets without necessarily being the legal owner. They are often used for passing assets onto minor children, second spouses or an incapacitated surviving loved one, for example.
Setting up trusts is often seen as a tax-effective measure that also maintains privacy.
A complete estate plan should also consider insurance protection for your assets.
This includes everything from insuring a business to taking out a full life insurance policy in the event that something unexpected happens to you.
Need help with your estate plan in Vancouver?
Call Spectrum Family Law in Vancouver for advice on creating your estate plan.
Our main hub for British Columbia is located in the heart of Vancouver. That said, we serve the entire province of BC. We have the infrastructure to work with any of our clients virtually — even the furthest regions of British Columbia.
We also have a dedicated intake form to help you get the ball rolling. Our intake team will review your specific case and advise you on the next steps to take as well as what to expect moving forward. That’s the best way to schedule an appointment
Our offices are generally open 8:30 a.m.—4:30 p.m., Mon—Fri.
Alfonso is a lawyer of our Vancouver office who provides services in both English and Mandarin. Prior to joining our firm, he worked at a full-service law firm for over four years, where he helped clients with a wide variety of family law matters, from drafting prenuptial agreements to negotiating terms for and drafting separation agreements to representing clients for divorces.