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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
Practical advice as you prepare to leave your legacy You've worked your entire life to give your loved ones the best life they can have. Don't let death be the end of your caring and thoughtfulness. You can make sure your family is taken care of after your death and your wealth and assets go where you intend with the help of Wills & Estate Planning For Canadians For Dummies. This down-to-earth guide takes some of the stress and uncertainty out of this unpleasant topic by offering straightforward advice about preparing end-of-life documents and planning your estate. Discover the best way to transfer your assets to your heirs and the charitable organizations of your choice. Find out how to prepare a living will, donate organs, and give instructions for your burial. You also get expanded information about family law in Canada, details on why you need a power of attorney, and guidance on will preparation, funeral planning, green burials, tax implications, and more. * Understand the laws surrounding estates, wills, trusts, and taxes in Canada * Get details on buying life insurance, naming your heirs and beneficiaries, and designating an executor * Find advice for discussing inheritance matters with a legal professional when you have a tricky situation * Put your mind at ease with a solid plan for your assets and your end-of-life care Thanks to practical advice from an expert author, you can ensure that your affairs are in order and your loved ones will honor your final wishes. Wills & Estate Planning For Canadians For Dummies will help you leave behind a meaningful legacy for all who know and love you.
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Wills & Estate Planning For Canadians For Dummies®
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Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
What You’re Not to Read
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1: Estate Planning Basics
Chapter 1: What Is Estate Planning, Anyway?
Understanding What Your Estate Is
Discovering What Estate Planning Is
Figuring Out Why You Need to Do Estate Planning
Getting a Handle on Estate Planning Tools
Knowing When You Should Make an Estate Plan
Looking After Your Needs
Planning in Case You Become Physically or Mentally Incapable
Getting Professional Help
Chapter 2: What Are You Worth? Preparing an Inventory of Your Estate
Figuring Out What You Own
Figuring Out What You Owe
Figuring Out Your Net Worth
Chapter 3: The Taxman Cometh: Taxes and Your Estate
Understanding Some Income Tax Basics
Discovering How Your Estate Will Be Taxed
Deciding What Your Tax Planning Goals Should Be
Considering Possible Tax Planning Strategies
Tax Planning That Takes Place after You Die
When the Taxman Finally Arriveth … with the Bill
Investigating Probate Fees
Part 2: Estate Planning Tools
Chapter 4: The Mysteries of Life Insurance Revealed
Getting Acquainted with Life Insurance
Deciding Whether You Need Life Insurance
Calculating How Much Life Insurance You Need
Determining Who Should Get the Insurance Money
Deciding on the Kind of Life Insurance You Want
Figuring Out Where and How to Get Life Insurance
Finding Out How Much Life Insurance Costs
Learning What a Standard Life Insurance Policy Says
Chapter 5: Giving Away Your Things Before You Die
Giving Away Your Property While You’re Alive
Unwrapping Gifts
Figuring Out How to Make a Gift
Avoiding Giving Away Your Property without Meaning To
Planning So That You Won’t Live to Regret Your Gift
Discovering Safer Ways Than Giving a Gift
Registered Education Savings Plans and Related Benefits
Chapter 6: Using Trusts in Estate Planning
Getting Acquainted with Trusts
Deciding Whether a Trust Is Right for You and Your Family
Investigating the Different Kinds of Trusts
Finding a Trustee You Can Trust
Paying the Taxes Associated with a Trust
Paying the Expenses of a Trust
Part 3: Creating an Estate Plan
Chapter 7: Choosing Your Beneficiaries and Executor
Considering Your Beneficiaries
Distributing Your Estate Amongst Your Beneficiaries
Thinking about Your Executor
Chapter 8: Planning Your Children’s Future
Understanding Guardianship
Thinking the Unthinkable: When One or Both Parents Die
Choosing a Guardian for Your Children
Looking at a Guardian’s Responsibilities
Providing for Your Children Financially
Chapter 9: What to Do with Your Business
Taking Stock of Your Situation
Timing the Market
Putting Your Plan into Action
What if You Were to Die Tomorrow?
Chapter 10: Making Charitable Donations
Thinking about Giving to Charity
Choosing the Right Charity
Making Sure Your Donation Gets Where You Want It to Go
Looking at the Ways to Give to Charity
Chapter 11: Planning Your Funeral and Organ Donation
Understanding Who Decides on the Details
Considering the High Cost of Death
Pre-Planning Your Funeral
At Your Disposal: Earth, Air, Fire, or Water?
If You’re Concerned about the Environment
The Gift That Keeps on Giving: Organ and Body Donation
Part 4: Putting Your Plan into Action
Chapter 12: Why You Need a Will
Investigating Where Your Property Will Go if You Die without a Will
Finding Out Who Will Administer Your Estate
Understanding the Difficulties That Will Arise in the Administration of Your Estate
Recognizing the Benefits of Having a Will
Chapter 13: Will Power
Looking at the Components of a Standard Will
Translating a Will into Plain English
Signing a Will
Knowing What to Do After the Will Is Signed
Looking at What Can Go Wrong with Your Will
Considering the Dangers of Do-It-Yourself Wills
Chapter 14: Powers of Attorney: Who’ll Manage Your Money for You if You Can’t?
Discovering What Will Happen to Your Finances and Property if Your Physical or Mental Health Fails
Examining the Different Types of Powers of Attorney
Peering into the Contents of a Power of Attorney
Preparing a Power of Attorney
Knowing What to Do After the Power of Attorney Has Been Prepared
Investigating What Happens When Your Attorney Takes Over
Discovering What Happens to Your Finances without a Power of Attorney
Chapter 15: Living Wills: Caring for You If You Can’t Care for Yourself
Understanding the Importance of Consent in Medical Treatment
Reviewing the Law Regarding Consent to Treatment
Looking at Treatments That Require Consent
Making Your Wishes Known
Understanding What Happens When Your Living Will Comes into Effect
Considering Possible Arrangements if You Haven’t Made a Living Will
Chapter 16: Getting Professional Help
Understanding Why and When You Need a Lawyer
Finding the Lawyer for You
Understanding How Lawyers Charge for Their Work
Knowing What to Expect of Your Lawyer
Dealing with an Unsatisfactory Lawyer
Getting the Most from Your Lawyer
How Your Lawyer Can Help You Assemble Your Team
What about a Sort-of Lawyer?
Working with a Professional Accountant
Determining Your Game Plan with a Financial Planner
Relying on Banks, Trust Companies, and Credit Unions
Getting Acquainted with Life Insurance Agents or Brokers
Chapter 17: Using Online Will Services
Online Will Services — an Overview
Advantages of Online Will Services
Disadvantages of Online Will Services
When Not to Use an Online Will Service
When Is It Okay to Use an Online Will Service
Part 5: Readying Your Estate and Keeping It Up to Date
Chapter 18: Don’t Leave a Mess Behind: Putting Your Affairs in Order
Preventing Your Death from Causing Confusion in Your Family
Organizing the Documents and Instructions Your Family Will Need
Assembling the Documents Your Executor Will Need
Keeping Your Documents Safe
Chapter 19: It’s Even Better the Second Time Around: Updating Your Estate Plan
Discovering What’s Involved in Reviewing Your Estate Plan
Learning Why and When You Need to Review and Revise Your Estate Plan
Changing Your Will
Updating Your Pensions and Insurance Policies
Revising Your Power of Attorney and Living Will
Part 6: The Part of Tens
Chapter 20: Ten Questions to Ask Before You Hire a Lawyer
Ask the Lawyer
Then Ask Yourself
Chapter 21: Ten Tips for Using the Internet for Estate Planning
Getting Financial Planning Help
Finding Income Tax Info
Looking for Insurance Help
Locating Legal Information
Getting Government Information
Finding Help with Funeral Planning
Looking into Organ Donation
Investigating Charities
Researching Your Living Will
Checking Out Online Will Services
Part 7: Appendixes
Appendix A: Prepare to Meet Your Lawyer
Appendix B: Instructions for Your Executor
Appendix C: Inventory for Your Executor
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Chapter 2
TABLE 2-1 What You Own
TABLE 2-2 What You Owe
TABLE 2-3 Your Net Worth
Chapter 4
TABLE 4-1 Average Annual Insurance Premiums for a Non-Smoker of Average Health f...
TABLE 4-2 Average Annual Insurance Premiums for a Smoker of Average Health for $...
Guide
Cover
Table of Contents
Title Page
Copyright
Begin Reading
Index
About the Author
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Wills & Estate Planning For Canadians For Dummies®, 3rd Edition
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2024 by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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ISBN 978-1-394-20812-8 (pbk); ISBN 978-1-394-20813-5 (ebk); ISBN 978-1-394-20814-2 (ebk)
Introduction
We’re all going to die, probably not today, and probably not tomorrow or even next week. But the nasty truth is that we’re all going to die someday. We usually can’t tell very far ahead what day that will be. But we can plan ahead against that day.
About This Book
When we go, we can’t take anything with us. Our possessions stay behind. They may as well stay with people we choose rather than go to people the provincial government chooses or be spent on government taxes and fees that could (at least in part) be avoided.
This book will tell you how to plan for the end of life by creating an estate plan, making a will, and making a power of attorney and living will.
This book is designed to be used as a reference, and you don’t need to read it in any particular order. You can dip into a chapter here and a chapter there if you like. On the whole, though, you’ll probably get more out of this book if you start at the beginning, proceed to the middle, and continue on to the end (although not all in one sitting).
I don’t expect you to remember anything from one chapter to the next — I always refresh your memory as necessary.
What You’re Not to Read
You don’t have to read chapters that you think are unimportant to you. If you don’t have children, you could skip the chapter on making arrangements for your children to be looked after following your death. If you don’t own a business, you could skip the chapter on passing on your business.
You also don’t have to read any text preceded by the Technical Stuff icon in order to understand what we’re talking about.
Foolish Assumptions
This book was written for people who aren’t lawyers or accountants or insurance brokers or financial planners but who want to know how to plan their estate and make their will. I don’t assume that you have any background knowledge about law or income tax or insurance policies or funeral planning or anything else. I start at the beginning of each subject and build up information about it. I avoid using technical language when it’s not necessary, and I explain technical terms in plain English if you need to know them.
Icons Used in This Book
I use a number of icons in this book to guide you to information that’s particularly important or useful … or in one case, that’s particularly easy to ignore.
This icon draws your attention to important information that you’ve probably already forgotten if I told you about it before or that I want you to remember in the future.
This one reminds you that there are some things you mustn’t do without getting professional help from a lawyer.
And this one lets you know it’s probably safe to jump to the next paragraph. But if you’re really interested in understanding the topic you should read these detailed definitions and explanations.
This icon alerts you that I’m saying something that could save you time, trouble, or money. When I hit a bull’s-eye, it could save you all three.
This ominous icon suggests not very subtly that you’re heading for trouble and very possibly complete disaster if you don’t follow my advice to the letter.
Beyond the Book
In addition to what you’re reading right now, this product also comes with a Cheat Sheet that includes tips on how to reduce your estate taxes, helpful information on whether you need life insurance, and a listing of the key pieces of information your loved ones will need after you’re gone. To get this Cheat Sheet, simply go to https://www.dummies.com/ and enter Wills & Estate Planning For Canadians For Dummies Cheat Sheet in the Search box.
Where to Go from Here
Estate planning and wills were not invented for controlling people who want to keep their hands on their property after they’re dead. They were invented for people who want to make sure that, after their death, life goes on fairly smoothly — financially if not emotionally — for their family and friends.
Part 1
Estate Planning Basics
IN THIS PART …
Learning what estate planning is and why it’s important
Calculating the present size of your estate
Finding out how Canadian tax laws affect your estate
Chapter 1
What Is Estate Planning, Anyway?
IN THIS CHAPTER
Figuring out what it means to have an estate
Knowing what estate planning involves
Exploring why estate planning is essential
Looking at the tools of the estate planning trade
Understanding the right time to prepare an estate plan
Ensuring that you’ll be financially covered in your lifetime. too
Taking care of your needs in case you become physically or mentally incapable
Going to the experts
Here’s the good news about estate planning: You have an estate! You don’t have to be a sports star or a computer maven or to have inherited old family money to have an estate or to need to do estate planning.
Now for the bad news about estate planning: It forces you to think about death — and not just in an abstract philosophical kind of way. It forces you to think about your own death. You may not enjoy the estate planning process very much, but in this chapter I explain why you should do it even though it’s not a lot of fun. I’ll ease you gently into estate planning. I briefly discuss the main things you need to know, and then in the following chapters I go into more detail.
Understanding What Your Estate Is
I keep talking about this estate of yours, but before you start wondering why the butler and chauffeur didn’t show up for work this morning, I’d better give you a little more detail about what your estate is.
Your estate is made up of everything you own. But in legal terms, your debts — everything you owe — are also part of your estate, because what you own must be used to pay off your debts when you die. (I show you how to take stock of your estate in Chapter 2.)
The things you own are referred to in law and accounting as your assets, and the debts you owe as your liabilities.
You need to take some other things into account when you’re estate planning, although they’re not technically part of your estate:
Life insurance:
If you have a life insurance policy, when you die either your estate or an individual (or individuals) you name as beneficiary, whichever option you have chosen, will receive the insurance proceeds. (I tell you more about insurance in
Chapter 4
.)
Pension plans:
If you’re a member of an employee pension plan, your spouse or a person you name as beneficiary may be entitled to receive a pension after your death or to receive a one-time payment.
Government benefits:
Your spouse and/or children may be entitled to receive either a pension or a one-time payment from the Canada Pension Plan, Old Age Security, Veterans Affairs Canada, or your provincial Workers’ Compensation Board (known by various names depending on your province) after your death.
Besides being what you own and owe, your estate is also a legal being that comes into existence on your death. It has some of the same legal rights that you had when you were alive, such as the right to enter into contracts and to sue and be sued. It also has some of the duties you had, the principal one being the duty to pay income tax.
Discovering What Estate Planning Is
Estate planning is essentially two things: planning to build up cash and other property in your estate, and planning what you want to happen to that property after you die.
Estate planning isn’t rocket science, but it isn’t a one-step process either. To start planning your estate you need to have a clear idea about the following matters:
What do you own and what do you owe?
What ways can you find of owning more and owing less so that you have more to leave behind?
Whom do you want to (or have to) provide for after you’re gone, and how much do they need?
What are the best ways of providing for them?
You’re going to have to take a hard, cold look at your financial situation and your family relationships and obligations.
Estate planning is not a one-time exercise, either. Whenever a significant event — like love, marriage, babies, divorce — occurs in your life you need to review your estate plan and make any changes that seem necessary.
Figuring Out Why You Need to Do Estate Planning
Here are the main reasons why you need to plan your estate. You want to make sure that when you die,
You have done everything in your power to see that your family has enough money to manage without you — it takes planning to set aside and invest money for your family and to make sure that you have enough insurance (see
Chapter 4
).
Your property goes to the people
you
want to have it — if you die without a valid will, the provincial government decides who gets your property based on rules set by provincial law, and it may well not go to the people you have in mind (see
Chapter 12
).
A person
you
choose will look after your estate — without a valid will, there will be no executor (also called estate representative, estate trustee, or liquidator, depending on your province) named by you who will have the automatic right to look after your estate; instead, someone (usually a family member) will have to apply to the court to be appointed to look after it (see
Chapter 12
).
You have a say in who will look after your children — if both you and the children’s other parent die, a will is the best way to let your surviving family and the courts know whom you would like to care for the children (see
Chapter 8
).
Your debts can be paid with the least damage to your estate — if you make no plan for payment of your debts, there may not be enough cash available to pay them (see
Chapter 13
). If you leave no will, the person appointed to look after your estate will have to sell some of your property to get the necessary cash, without any guidance from you about what to sell and what to keep in order to give to a particular family member or friend.
The capital gains taxes your estate has to pay will be as low as possible — when you die your estate is taxed as if you had sold everything you owned just before you died, and without proper tax planning the bill can be high (see
Chapter 3
).
The probate fees (sometimes called an estate administration tax) payable in all provinces other than Quebec and Manitoba will be as low as possible — in almost all provinces probate fees are calculated according to how much your estate is worth; with advance planning you can reduce the value of your estate for probate purposes, and so reduce these fees (see
Chapter 3
).
The future of any business you own has been looked after — you need to plan ahead, whether you want your business to carry on (who should look after it?) or whether you want it to be sold (how to get the most money for it?). (See
Chapter 9
.)
Here’s a final, even more morbid, reason to plan your estate. As part of the process you can let your family know what you’d like done with your body. (Oddly enough, your body is not part of your estate, unlike the other things that belonged to you when you were alive, it belongs to your executor or, if you have no executor, your closest relative.) You can make your wishes known about organ donation (yes or no) and funeral arrangements (plain oak or elaborate casket, burial or cremation, flowers or donations to a favourite charity), so that your family members don’t have to go through the stress of making choices they think you’d approve of, or maybe even end up fighting about.
Getting a Handle on Estate Planning Tools
When you know what your estate consists of and what you want to give to whom, you can choose some estate planning tools to help you do what you want.
These are the most commonly used estate planning tools:
A will:
A will is a written, signed, and witnessed document that states how you want your property to be given away after you die, and appoints an
executor
to look after your property and debts after your death. I strongly advise that you have a lawyer prepare your will. (I tell you more about wills in
Chapters 12
and
13
.)
Gifts given during your lifetime:
A gift is a transfer of all of your rights over a piece of property. (After you make a gift, you no longer have the right to hold on to the thing given or to sell it or to take it back from the person you gave it to or to leave it to another person in your will.) Giving a valuable gift usually has tax consequences for the giver. “Tax consequences” is a fancy way of saying “tax payments.” I tell you more about gifts in
Chapter 5
.
Trusts: A trust is another way to give property away during your lifetime. But instead of giving the property directly to the person you want to have the use of it (the beneficiary), you choose another person (a trustee) to hold and look after it for the use of the beneficiary. Why, you may be asking, would anyone want to do a weird thing like this? The main reason is to prevent the beneficiary from having total control of the property (for example, if the beneficiary is a child, or has a mental disability, or is hopeless about business matters; or if you want one person to have use of the property in the short term but want a different person to become the owner of the property at a later date). Setting up a trust may have income tax benefits. If you decide to set a trust up, you’ll need a professional — an estates and trusts lawyer or a tax lawyer, to advise you and to do the paperwork. (For more on trusts, see Chapter 6).
Joint ownership of property during your lifetime:
Joint ownership while you’re alive allows you to control who gets the jointly owned property when you die. You can own property jointly with another person (or with other people). All sorts of property (real estate, bank accounts, mutual funds, or other investments) can be owned in this way. When you die, your share in the property will automatically pass to the surviving owner without being mentioned in your will in all provinces other than Quebec.
Life insurance:
Life insurance is a kind of bet that you make with an insurance company. You’re betting that you’ll die while the policy is in effect, and the life insurance company is betting that you won’t. If the life insurance company loses, it has to pay up on the bet — that’s the proceeds of the policy. A life insurance policy will help you ensure that your family has enough money after you die to replace the income you will no longer be around to earn, or to help them pay off taxes or other debts without using up your estate. However, many insurance policies end when the insured reaches retirement age — in other words, just when your chance of winning starts to improve.
Knowing When You Should Make an Estate Plan
Most people put off estate planning because they don’t want to face the certainty of dying. Some people are even afraid that doing some estate planning makes them more likely to die. According to an Ipsos survey conducted in 2022, 74 percent of Canadians 55 and older have a will, but only 34 percent of those between 35–54 have one, and only 30 percent of those under 35 have one. Overall, only 48 percent of Canadians have a will. I can assure you that there is no cause-and-effect relationship between estate planning and death. There is however a cause-and-effect relationship between a lack of estate planning and wasted time, trouble, and aggravation for the people you care about.
You should make an estate plan as soon as you have any significant property (and you care who’s going to get it) or as soon as anyone is financially dependent on you, whichever happens sooner. You are legally able to make a will when you’re quite young — as soon as you are 18 years old (even younger in some limited circumstances, as I explain in Chapter 13). Don’t assume that estate planning is something to do when you’re “old,” because you don’t have to be old to die.
Going through the estate planning process once is not the end of the matter. You will have to change your estate plan as changes occur
In your personal life.
You should review your estate plan if you marry. Have a look again if you have children and as they grow up, leave home, and start to earn their own living. Think about changing your will if your spouse or partner dies or if you divorce or even if you separate and meet someone new.
In your business life.
If you start a business either alone or with others, you should review your estate plan to make sure it deals with your business’s debts and with whether your business will fold or carry on under new management when you die.
In your executor’s life.
You may need to change your will if the person you have named as your executor is no longer willing or able to take on those duties, or if you decide that you need someone with more sophisticated business or investment skills.
In the value of your property.
If the value of the property you own goes way up or down in value, you may want to make changes to your estate plan to deal with the change in the taxes your estate will have to pay and with the debts your estate may have. You may also want to rethink how you’ve divided up your property in your will if you’re trying to treat everyone equally.
In the law. Between the time you plan your estate and the date you die there may well be changes to tax law, family law, and estate law that may require changes to your estate plan.
Looking After Your Needs
You’re not dead yet. When you put together your estate plan don’t get so carried away with looking after everybody when you’re dead that you forget to look after yourself while you’re still alive.
What if you build up your investments but never have any money for new clothes, a night out, or a vacation? Suppose you were to give your cottage to your children on the understanding that you had the use of it for a few weeks every year? How happy would you be if they squabbled with you about when it was your turn and when it was theirs? What if you made your unmarried significant other a joint owner with you of the house you bought … only to find one day that significant other had run off with your best friend?
You must make sure that your plans leave you with enough money and property (and enough control over your money and property) to last you until you die.
Planning in Case You Become Physically or Mentally Incapable
While you’re confronting your own mortality, you have to also think about the possible decline before your ultimate fall.
A complete estate plan includes a plan for any time during your life that you can’t manage your own financial affairs — not only if you get Alzheimer’s disease but if a car accident leaves you in a coma, or if you have an operation that puts you out of commission for even just a short time, or, on a happier note, if you’re spending two or three months in Florida during the winter and you want someone to be able to look after things while you’re away.
The tool used for managing financial matters is a power of attorney. A power of attorney is a written, signed, and witnessed document that gives the person of your choice (called an attorney in most provinces) authority to handle your legal and financial affairs.
You also have to think about what you want done if your health declines to the point that you are no longer able to make decisions about your own health care. When that happens, someone else has to make decisions on your behalf — but who do you want that someone to be? And what decisions do you want that person to make?
The tool used to deal with health matters is a living will, (known by various names depending on your province), by which I mean a written document that sets out your wishes about your health care, and that appoints a person (family member or friend or anyone you wish) to make health care decisions if you become unable to make those decisions for yourself. If you don’t have a living will, provincial law tells doctors and hospitals which of your nearest and dearest they should turn to for instructions. First on the list is a spouse, then adult children, and so on. If you run out of close relatives, the doctors and hospitals may have to ask a government official what to do with you.
Getting Professional Help
Should you get professional help? In a word, yes — except in the very simplest, most straightforward of cases — and your estate is probably not one of them! I want to make this very clear. Estate planning and will preparation are dangerous territory for the do-it-yourselfer. The law in these areas is very complicated.
If you make a mistake in preparing or signing your own will and power of attorney, they may not do what you want them to do, or, even worse, they may be totally invalid. And let’s not even think about what will happen if you make a mistake in planning to reduce the taxes on your estate.
But naturally you’re worried about the cost of professional help. Will you have anything left in your estate after you pay for it? Obviously, cost will be related to the amount of work you want done. If you have a large estate and need to make complex arrangements to reduce taxes, sure it will be expensive, but generally a will is a real bargain as far as legal services go.
Lawyers aren’t the only professionals who can help you in planning your estate. Although a lawyer (or, in Quebec and British Columbia, a notary) with experience in will preparation should always be used to draft the actual legal documents and can usually give you much of the estate planning advice that you need, other professionals, such as accountants and financial planners, can also help in the financial, investment, and tax-saving part of the planning process. You may also be able to get advice from people or institutions you may deal with while building or planning your estate, such as
Insurance agents or brokers
Trust companies or banks
Stockbrokers and mutual fund agents or brokers
Even with professional help, the more you know the better. That’s where this book will come in handy. I’ll take you through the process of estate planning, financial planning, and preparing a will and other documents so that you can get the most out of your professional advisers.
Chapter 2
What Are You Worth? Preparing an Inventory of Your Estate
IN THIS CHAPTER
Itemizing what you own
Taking a look at what you owe
Puzzling out your net worth
The first step in estate planning is to get a handle on what’s in your estate. That means looking at everything you own and everything you owe, as well as any life insurance, pension plans, or government benefits to which your estate may be entitled. After you’ve got those numbers, you can calculate your net worth.
When you know where you stand, you can think about planning to increase the value of your estate. Doing that requires financial planning, which is not what this book is about. However, Personal Finance For Canadians For Dummies by Eric Tyson and Tony Martin (Wiley) is a good book on that subject.
Figuring Out What You Own
Make a list of everything you own and its value. You can be high-tech or low-tech — use your computer and a personal finance program or a plain piece of paper and a pencil. You may find Table 2-1 helpful. You can also find net worth calculators on the websites of banks, insurance companies and investment companies, but check their privacy and security settings to make sure that any information you enter is secure. And expect to be contacted by the company in an attempt to solicit your business.
Start the list with the things that are easiest to value:
Bank accounts:
Check your most recent print or online bank statement, or your bank or trust company website if you have online access to your account, to find out what your current balance is.
Guaranteed investment certificates:
Look at the certificate to see how much you originally invested and call your bank or trust company, or go to its website to find out how much interest has accumulated since that time.
Stocks, corporate bonds, and mutual funds:
If you have a broker and have set up online access to your accounts, you can log on to their website to get the current value of your accounts. If you haven’t set up online access your broker should mail an account statement to you monthly or (if you don’t do a lot of buying and selling) at the end of any month in which there’s been activity in your account. Ask for a statement if you haven’t received one recently. If you don’t have a broker, you can find out the value of publicly traded shares and bonds by searching the name of the share or bond on the Internet.
RRSPs:
Call your bank, trust company, or other plan administrator, or check their website for the current balance if you don’t get regular account statements.
Life insurance policies:
Call your insurance company or agent to see if you have the right to cash in any of your policies before you die (and if so, for how much right now).
Employment pension plans:
Your pension plan may have a website where you can find the present value of your pension. Or, you can ask your employer to give you a statement of its present value. Note that the present value of your pension is not necessarily the same as the total of your contributions and your employer’s contributions plus interest.
Money owed to you by others:
If you are in business as a sole proprietor or as a partner in a firm, include the amounts of any bills you have sent to your clients or customers and that haven’t yet been paid (but you expect will be paid). Also include the amounts of money owed to you by anyone (including a friend or relative) that you expect to receive.
Then look at the things you own that you could sell if you needed to. Their value is the amount that a stranger who actually wants them would be willing to pay for them (this is called fair market value).
Your home, cottage, or other real estate:
Search on the Internet to see the asking price of properties similar to yours (the sale price may be higher or lower than that); or for a fee you can have a real estate agent or appraiser value your property.
Cars, boats, or other vehicles:
Check newspaper ads or search on the Internet to see what a vehicle of your make, model, and year is selling for privately, or call a dealer. A dealer would likely offer you a lower price than a private buyer.
Artwork and antiques:
Visit art galleries or antique shows, or search on the Internet to find out how much similar items are selling for. You can consult a dealer about the value of your property, but a dealer will probably charge to give you a careful valuation.
Jewellery:
Browse around pawn shops or jewellery stores that sell estate jewellery to learn the resale value of your pieces, or ask a jeweller for an opinion (you might have to pay for anything more than a casual answer).
Furniture and household contents:
Go to second-hand shops, or check online ads for used furniture to find out what your sofa, dining room table, and bedroom suite are worth on the open market.
Your business, if you own one:
Conservatively speaking, your business is worth at least as much as its parts (equipment, inventory, accounts payable, property owned or leased, etc.) could be sold for. Estimate the fair market value of those parts. Your business may be worth more than the value of what it owns, if it has a fabulous reputation or a great location or an incredible client base. You would need to pay a business valuator to put a price on your business if it could be sold as a whole rather than sold off piece by piece. If your business is essentially you personally providing a service (say dressmaking or accounting), it may not be worth much to anyone but you.
You’ll quickly discover that you paid a lot more for your belongings than you can hope to sell them for.
TABLE 2-1 What You Own
Item
Value
Bank accounts
$________________________
Guaranteed investment certificates
$________________________
Shares
$________________________
RRSPs
$________________________
Life insurance policies that can be cashed in
$________________________
Employer pensions
$________________________
Money owed to you
$________________________
Your home
$________________________
Other real estate
$________________________
Cars and other vehicles
$________________________
Boats
$________________________
Artwork
$________________________
Antiques
$________________________
Other collections
$________________________
Jewellery
$________________________
Furniture
$________________________
Appliances
$________________________
Other household contents
$________________________
Your business
$________________________
Total
$________________________
Figuring Out What You Owe
Your debts may be something you’d rather not think about. How much do you owe and to whom do you owe it? Table 2-2 will help make this job a bit easier.
Make a list of everyone you owe money to and the current balance that you owe in each case:
Mortgages:
Call your mortgage lender, or check their website if you have online access to your account, to find out your outstanding principal balance.
Car loans:
Call the lender (bank or financing company) or check their website if you have online access to your account to find out the outstanding balance.
Other personal loans:
Again, call the lender or check their website to find out your outstanding balance.
Student loan:
You may receive regular statements; if not, call the bank or check their website.
Credit card balances:
Check your most recent print or online monthly statements, or check their website.
Outstanding income tax instalments or arrears:
Check your reminders from Canada Revenue. If you have registered for the CRA MyAccount portal, you can see your instalment amounts and any arrears online.
Real estate taxes:
Look at your municipal tax bill for the total amount of your annual taxes (it will also show any outstanding unpaid amount) and deduct any payments you’ve made, or phone your municipal tax department to check. Or your municipality may allow online access to your tax account.
TABLE 2-2 What You Owe
Item
Value
Mortgages
$________________________
Car loans
$________________________
Other personal loans
$________________________
Student loans
$________________________
Credit cards
$________________________
Income tax instalments or arrears
$________________________
Real estate taxes
$________________________
Total
$________________________
Figuring Out Your Net Worth
Your net worth is what you would be worth financially after paying off all of your debts. To calculate your net worth, subtract the total of your debts from the total value of what you own. (You can use Table 2-3.)
TABLE 2-3 Your Net Worth
What you own (total from Table 2-1)
$________
–
What you owe (total from Table 2-2)
$________
Your Net Worth
$________
