Know the Difference: Estate Plans vs. Wills
Many people falsely believe that an estate plan simply means drafting a will. But a will is just one component of an estate plan.
An estate plan is much more comprehensive and may necessarily include many more documents than a will.
Having a Will is Crucial
At a minimum, you should have a “Will”. A will is a legal document that should specify how you want your assets distributed. It can also name an executor who will ensure that the directions of your will are carried out. In the absence of a more comprehensive estate plan, your will should also state who will be the guardian of any underage children.
A Will only takes into account your assets and obligations at the time of your death.
A Will is Usually Not Enough
Ideally, your will is the primary building block of your estate plan; however, even if you have minimal assets, an estate plan can ensure that your assets go to your desired beneficiaries, your chosen guardians care for your underage children and your funeral and internment instructions are followed.
An estate plan may also apply while you are living, should you become incapacitated.
Estate planning takes into account your current and future financial assets and obligations, current management of your assets, distribution of your assets on your death, and any post-death legacy planning, which can cover achieving your philanthropic desires, setting up an asset distribution structure and/or deferring the distribution of your assets.
Key Components of an Estate Plan
Wills and Trusts
No matter the amount of your assets you should have a will – and/or a trust.
A will ensures that your assets are distributed to your beneficiaries as you wish. Without a will, a probate court could lead to an unintended distribution of assets. Putting your assets into a trust with specific documentation around it may not achieve the same goals as a simple will but can help to limit estate taxes and legal challenges.
Power of Attorney
A power of attorney designates a person or entity of your choice to ensure assets and finances are properly managed after your death or if should you become incapacitated while living.
Healthcare Power of Attorney
A healthcare power of attorney designates someone to make healthcare decisions on your behalf if you should become incapacitated before your death. They become responsible for carrying out your “living will” as it pertains to your physical well-being.
If you have underage children, an estate plan is crucial, as it should name their guardians in the event that your spouse has pre-deceased you or is unable to care for them. Without a guardianship designation, a court may rule that your children be cared for by a family member or other person you would not have chosen.
Letters of Intent
Letters of intent are specific instructions for the executor or a beneficiary to follow. They can provide for the specific allocation of assets, distribution of family heirlooms, funeral directions, charitable allocations, etc.
Revisit your Estate Plan
Keep your estate plan current. Revisit at least every two years or after any major life-changing circumstance such as marriage, divorce, the birth or adoption of a child or grandchild, the sale of a family business, the sale of property, moving to a different province, declining health, etc.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.