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Why is Estate Planning Important?
Many people assume that estate planning is only for the wealthy. So, it must come as a shock to the families of all the Canadians who die every year without a will when the province takes control of the estate to decide how the assets are to be distributed. Even for smaller estates, the costs and delays of probate can have devastating consequences. The goal of estate planning is to arrange your financial affairs in a way so that your assets can be passed to your heirs as quickly and as completely as possible.
The good news for Canadians is that no estate tax is owed when an estate is transferred to your heirs after you die. The bad news, however, is that depending on the type of assets in an estate there may be "deemed disposition tax" that could seriously disrupt the financial lives of your surviving family. Properly planned estates have assets arranged and titled in such a way as to minimize any taxes payable. Estate planning tools such as trusts are often employed to reduce the exposure to taxes. Estate planning is not just planning for death; it is also essential to ensure that your affairs are handled in accordance with your wishes while you are alive. Should you become mentally or physically incapacitated and unable to manage your own affairs, tools such as a power of attorney become important life planning tools.
Many people avoid estate planning because they think it is complicated and expensive, which, for most estates, is not true. While it usually requires the guidance and assistance of an estate planning professional or attorney to execute the legal documents, a lot of time and expense can be saved by organizing your financial information and determining your goals and objectives prior to meeting with one. At the very least, everyone should have a simple will, which for the amount of distress and costs it can prevent, is very inexpensive. Larger estates may require additional layers of estate planning tools, such as trusts. Still the more preparation done in advance, the easier and less expensive the process will be.