Just over one half of B.C. adults have a valid Will, yet many of us fail to regularly review our estate planning documents to ensure that they continue to reflect our current situation and wishes. Updating your will is important.
Comprehensive Personal and Estate Plan
A comprehensive personal and estate plan for B.C. adults includes not only a Will, but also “living documents”, to plan for the possibility of incapacity during a lifetime, including a Power of Attorney and a (Health) Representation Agreement. One of the most overlooked aspects of estate planning is illness or disability. Who will care for you if you become incapacitated and can no longer make decisions for yourself? What type of medical care do you want and what personal care would you prefer if you require living assistance? Articulating your desires before you become ill, disabled, or incapacitated can save everyone heartache down the road and will ensure that your wishes are followed if you are unable to represent yourself. Furthermore, if you are temporarily incapacitated by accident or illness, or permanently incapacitated by accident or mental incapacity, who will make your financial and legal decisions for you? What if your spouse is not available to help? By appointing decision makers to assist you with health and personal care decisions (through a Representation Agreement) and financial and legal decisions (through a Power of Attorney) you ensure that you are protected and your wishes are followed if you can’t advocate for yourself.
Ideally, personal and estate planning documents should be customized to each person’s unique circumstances with the assistance of an estate planning solicitor and the assistance of a tax accountant (specializing in estate tax planning). With estate planning, one size does not fit all, and without working with experienced professional advisors, you may not be aware of all the considerations that you should take into account.
Review Your Plan
All three planning documents should be reviewed regularly to ensure that they continue to reflect your family and financial situation. The following are some life events that may trigger the need to review your plan:
Did you know that without a will your surviving spouse may not be the sole beneficiary of your estate? Also, stepchildren do not inherit from step parents by default, but need to be specifically named in a Will. To ensure your spouse, or anyone else gets particular belongings from your estate, you must outline it in your Will. You may also wish to enter into a marriage agreement if one or both spouses come to the marriage with significant assets or you are blending families.
Divorce or death of a spouse
If you are widowed or are divorcing or divorced, you need to review your Will to decide whether you need to change your plan in order to remove your late or ex-spouse, as well as possibly modify the appointed guardians and trustees. You may also wish to change your appointees under your Power of Attorney and (Health) Representation Agreement.
Purchasing or refinancing a home
Buying or selling real property is always a good time to consider updating your will and to review your planning documents.
New financial assets or accounts
Making sure all bank accounts, shares, and other financial assets are planned for carefully to avoid these assets going through probate unnecessarily and /or to minimize taxes.
The birth of a child
Updating your estate plan after the birth of a child, the adoption of a child or the addition of a step child goes beyond consideration of your assets. Most important is the nomination of a guardian(s) to care for any minor child(ren) in case something happens to you. If you don’t, you could risk having your child(ren) cared for by a guardian you didn’t approve. You will also want to ensure that your minor child’s inheritance is held in trust and paid out to him or her after reaching adulthood in a carefully planned manner to ensure that he or she doesn’t inherit too much too soon.
Change in beneficiaries and change to appointees (executors, guardians, personal representatives or trustees)
The one thing we can all count on during our lives is that change is inevitable. Children grow, people get sick or die, friendships and relationships change. Our needs and those of our loved ones change and these changes often necessitate changes to appointments in your planning documents.
Addition or change of charitable gifts(s)
As we walk through life and our life experiences create passions, many of us choose to leave a legacy of change through charitable giving. As life happens, and since many of us choose to give during our lifetimes, our legacy plan can change over time.
Unexpected Illness or disability of yourself or your spouse
What would happen to your estate if you or your spouse becomes ill or incapacitated. What about if one of your children, grandchildren of other beneficiaries became incapacitated or suffers from a disability or addiction? Receiving money from your estate could actually harm a beneficiary instead of helping. If a disabled person receives a large inheritance outright, it could cause that beneficiary to be ineligible for needs-based government care programs. Plan for both of these by updating your estate plan before you become incapacitated or in the event your loved one becomes ill or disabled.
If you have received a diagnosis with a prognosis of eventual mental incapacity or you live with a medical condition that renders you temporarily incapacitated periodically, it’s important to plan as soon as possible for this.
Death of a spouse or beneficiary
If your spouse, child, grandchild or other beneficiary dies, you will need to ensure your estate plan does what you want. For example, if your child dies leaving his or own children, do you want that deceased child’s portion of your estate to flow through (or “gift over”) to that child’s own children or would you prefer that your other children share that portion of the estate?
Existing illness or disability of spouse, child or other beneficiary
If your spouse, child, grandchildren, or other beneficiaries has or is expected to have limitations because of physical or mental health issues or disabilities, your family would benefit from planning to address these special needs and preserve your beneficiaries’ eligibility for government benefits. It’s important to plan carefully for this now.
Substantial change in assets or income
If you are retiring, experience a significant change in how much you earn, if you buy a business, purchase a new home worth significantly more than your previous home, win the lottery or receive a significant inheritance, reviewing your existing plan is important from a planning and an estate tax planning perspective.
Moving to another province or country
Every province and country has their own unique set of estate laws and taxes. Upon moving to a new jurisdiction, have your estate plan reviewed by a lawyer and it is likely you will benefit from updated estate planning, including estate tax planning. This is the only way you can be confident that your estate plan will continue to have the same effect in your new jurisdiction.
If you buy, sell or experience a major change to your business (including adding a partner, experiencing significant growth, change your business structure or enter into significant new agreements) it’s very important to review your estate plan.
Acquired real property outside of B.C.
If you buy real property outside of the province in which you are domiciled (including outside the country), you should review your plan and you may need to work with a lawyer in the jurisdiction where the property is located in cooperation with your B.C. estate lawyer and tax advisor to ensure that your plan is effective.
The current Canadian tax laws offer tax benefits to Canadians 65 and over who engage in trust planning. You should discuss updating your will with your estate lawyer and tax advisor.
The sunset years
As we approach the end of our life and it’s clear that we will not require the entirety of our assets to meet our financial needs during our lives, there are many advantages to gifting to loved ones and charity while we are still alive that can reduce the cost and complexity of administering an estate, with the added benefit of sharing in the joy of your generosity to others.
Changes in the law
The law is constantly fluctuating, including both federal tax and trust laws and provincial tax and probate laws. Changes to these laws may prompt an estate plan update to ensure your plan is as effective as possible to meet your goals.
The passage of time is reason enough
Even if none of the above events apply to you, everyone should review his or her estate planning documents every 3 years.
The only thing you can expect in life is the unexpected. Planning ahead and keeping your estate plan constantly updated will ensure that your family is protected and will maximize the value of your estate and minimize the complexity, time and cost to administer your estate once you are gone.
Jody Pihl is a solicitor who practices in the area of Estate Planning, Incapacity Planning and Estate Administration. Jody and her paralegal Diane Rule are happy to assist with your estate related questions.The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.