Written in conjunction with Tailor Law
The world is an uncertain place — and that’s especially true in the age of COVID. It’s never too early to start getting your affairs in order in the unfortunate event of your passing. Being prepared is never a bad idea as it will put your mind at ease knowing that there’s one less problem your loved ones will have to worry about.
Estate Planning 101
You may think of estate planning as something the wealthy do, but it’s important for anyone to do regardless of their financial situation. An estate is essentially everything you own or have a legal interest in — property, bank accounts, investments, physical possessions, and a lot more. In estate planning, you arrange to transfer your assets (and liabilities) to others in the event of your death.
Your will is perhaps the most crucial step in estate planning. Your will provides instructions on how your assets should be distributed. If you don’t have a will when you die, you’re considered to have “died intestate.” In Ontario, this means the provincial government decides what happens to your estate. The law stipulates that the first $50,000 be given to the surviving spouse, with the remaining being divided equally between the spouse and children. Any assets given to children under 19 must instead be given to a guardian or public trustee. If there is no surviving spouse or any children, your assets are given to your parents. If there are no parents, siblings are next in line. All of this business is overseen by an administrator assigned to the estate.
Your executor is the person you’ve selected to oversee the distribution of your estate assets. They also typically make funeral arrangements and deal with any outstanding debt or taxes. Executors are usually someone you’re close with and can trust (spouses are common) and are normally compensated by the estate for their work. If you don’t appoint an executor before you die, the courts will select one for you.
Power of Attorney
Power of attorney refers to a document that gives a person of your choosing the power to act as your attorney. They do not have to be a lawyer, but they should be someone you trust completely. A power of attorney operates while a person is alive but incapacitated and unable to manage their affairs, making personal care and financial decisions on their behalf. An important thing to note is that your spouse cannot operate as your power of attorney unless you make them one. There are three types of power of attorney:
Also referred to as “living wills,” advance directives are instructions for your power of attorney for personal care. They typically contain your wishes on how you want to be treated and cared for. If you become incapable of communicating your wishes, your advance directive can be read.
Deemed Disposition Tax & Final Tax Return
A deemed disposition tax is a tax applied to your assets that are “deemed” to be sold upon your death. You can defer this tax by transferring your items to your spouse while you’re still alive, either through a direct transfer or placing them in trust. However, if your spouse chooses to sell those assets, the tax will then apply. If your spouse dies and your assets pass to your heirs, 50% of all capital gains are taxable at the personal income tax rate.
Your executor typically files your final tax return. It will include the value of any stocks, bonds, investments and retirement accounts during the year of your death — January 1st until the date of death.
A trust is when you give a third party the authority to handle your assets for the benefit of another person. In terms of estate planning, there are two main forms of trusts:
Plan Ahead for Peace of Mind
Estate planning is a serious business and should only be trusted to professionals. Lawbrokr provides a platform that allows users to browse a database of estate lawyers to find the perfect match for their situation. With simplicity and convenience, Lawbrokr is changing the landscape of client-lawyer relationships.