Key Market Facts

March 15, 2005

Estate planning is not just for the elderly. Everyone should have an estate plan. By planning for tomorrow today you can retain more of your assets, protect the value of your estate and reduce the burden on your beneficiaries. This article is the first of a two part series I have prepared on Estate Planning. The second article will cover death and taxes, gifting assets, living trusts and insurance.

When developing your estate plan you should follow six basic steps:

1. Create an inventory: List all of your assets and liabilities. Update this list as your personal situation changes.
2. Define your objectives: Who will be your beneficiaries and what do you want them to receive? Do not overlook personal items as they are often the most disputed over. Who will be the guardian of minor or disabled children?
3. Evaluate your objectives: Can you achieve your estate objectives based on your current situation? Do you have adequate assets for your beneficiaries and do you need to consider the spouse of your children?
4. Make an action plan: Document your plan. Normally done with your will but may also involve insurance policies, trusts and ownership agreements.
5. Get professional advice: Ensure that you get professional advice so that your plan is properly implemented. Evaluate the credentials of these individuals and inquire about the fees up front.
6. Review your plan: As your personal situation changes, review your plan. This will ensure that it remains relevant.

Planning for Incapacity
Planning for incapacity is an often over-looked area of estate planning but one that should be addressed by everyone. Creating an enduring power of attorney (PA) enables your attorney to manage your property and finances even if you become incapacitated. A standard PA is not valid if you become incapacitated. Your enduring PA can be limited or wide-ranging depending on your individual needs. This document does not however allow your attorney to make decisions for you with respect to personal care and health issues. In BC, these would be covered in a Representation Agreement. Upon death your power of attorney is no longer valid.

Your Will
Your Will is the fundamental component of an estate plan and is the most common means for transferring your estate. It is a legal document, which comes into effect upon your death.

Your Will can be revised at any time during your lifetime and outlines how you wish to have your assets distributed. You can appoint an executor, name a guardian for minor or disabled children, provide instructions for your funeral and set up trusts for your beneficiaries in this document.

It is important to note that as a result of the Wills Variation Act in British Columbia the instructions in your Will can be challenged by those who believe they were not treated fairly.

If you do not have a Will when you die, you are considered to have died “intestate”. Each province has its own intestacy rules. There is no flexibility in the resulting distribution of your assets and the court will appoint a guardian for minor children.

Testamentary Trusts
Testamentary trusts are created within a will and take effect at death. They provide tax efficiency and asset protection for the beneficiaries. One or more trustees control the assets in these trusts. The trustee can also be the beneficiary. Capital and income can be distributed to the beneficiaries. They are used for a wide variety of purposes, such as for the benefit of a spouse, a minor child, a disabled child, a “spendthrift” or adult children.

With minor children you can set out at what age or ages the children can receive their capital and under what conditions they can encroach on capital (education, health care etc). As they are the only type of trustwhose income is taxed using graduated tax rates, they can be beneficial for high income earning beneficiaries. Testamentary trusts can also protect the assets from creditors or a possible divorce settlement for the adult beneficiaries. For more information on Estate planning or to sit down with me and create or review your estate plan please contact me at 604 257-7055.

Did You Know?

I am sorry to announce that Iashi is moving to Halifax on March 18th to be closer to her husband’s family. She will be working in our Halifax office. We wish Iashi the best of luck. She will be missed.

On a brighter note Andrew Bryson has joined our team as my Associate. He grew up in Ontario where he received his business/economics degree from Brock University. Andrew moved to BC in 1994 where he started his career at RBC. He spent seven years at Action Direct as a royal circle investment representative assisting high value clients with their trading and investment questions. He joined Dominion Securities in the Fall of 2004 and I am happy to announce accepted a position with me. In his spare time Andrew enjoys skiing and camping.

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