Many people hear the term “estate planning” and immediately think of writing a Will. Although this is a crucial part of a good estate plan, it is by no means the only part.
A comprehensive estate plan starts with determining your goals and objectives. This is followed by putting the stepping stones in place to ensure that these requirements will be met. A proper estate plan should include:
- Preparing and executing a valid Will;
- Preparing and executing Powers of Attorney for property and for personal care;
- Insurance planning and beneficiary designations for insurance and registered plans;
- Income tax planning;
- Probate fee planning; and
- If a business is involved, succession planning.
These elements should be considered together as part of the overall plan and never as individual pieces.. Too often individuals make plans to avoid probate fees (or what some consider “Estate tax”) without considering the income tax or equity distribution implications. Elaborate schemes are put in place to avoid probate altogether, but this can result in increased overall tax outflow and inequitable distributions to beneficiaries. A better plan is to limit probate fees, but within the context of the optimal estate objectives.
Estate planning should never be static. Life’s only constant is change, and as a result, the estate plan should be consistently revisited and revised. What made sense 10 years ago may not make sense today. Estate planning should also not be reserved for the retired or ill. All adults should have a plan in place. Complexity levels will vary based on objectives, stage of life and wealth, but a simple plan is better than no plan at all.
Even though it is difficult to discuss death and finances, it is important to engage in these conversations to ensure that your affairs are in order in the event of a tragedy. No one can be sure when and if a tragedy will occur, but having a solid plan in place and encouraging your loved ones to do the same will help act as a safeguard.
