Two new polls find that estate planning is not enough of a priority for most Canadians. Find out the top mistakes people make - plus expert tips for keeping your affairs in order.
CIBC has released a new survey that found 84 per cent of Canadians have named a friend or family member as executor, which the bank says could be a risky move.
The poll surveyed 1,002 Canadians and was conducted by the bank this past March.
About 80 per cent of respondents said they had no prior experience in administering a will.
An executor is responsible for making funeral arrangements, filling individual and estate tax returns, assessing the value of estate assets and liabilities, accounting for the estate financial activities and collecting any insurance proceeds.
The poll found that two thirds of Canadians thought an estate could be wrapped up in a year or less, while 38 per cent thought that it would take less than six months. In reality, when all goes smoothly it can take from a year to 18 months, but complications such as tax errors can delay the process by months or even years.
The survey also showed that 37 per cent of Canadians had not updated their will in over five years, something the bank advises against. A review of the will is especially necessary whenever a major life event such as a marriage, divorce or birth of a child occurs.
Another survey conducted by RBC found that most Canadians feel that having a will is enough to protect them in rough times – not taking into consideration that a time may come when power of attorney and other concerns will likely be needed before a will is invoked.
They found that 81 per cent of retired boomers had a will, but only 49 per cent had a current health directive – a written document that explains how they would like to be treated medically if they are no longer able to communicate. Only 39 per cent were found to have a current financial directive – which appoints someone responsible for their financial affairs.
Although planning for such a time is a hard task, it is much worse to leave your loved ones in a situation where they do not know how to fulfill your wishes during an emotional time. The potential for disputes among family members is also a concern, so it is always best to plan ahead.
Here are some tips to help you avoid these risks:
- Take careful consideration when deciding who is best for the task of executor. The chosen person should have the time, knowledge and skill to take on these numerous duties.
- Be sure to discuss with your family and advisers exactly how you want your estate to be distributed so everyone is on the same page.
- Consider contacting a lawyer to help explain all your options and ensure your documents are in order.
- Make sure you have a will as dying without one increases cost, adds stress on your family and takes away control of your family’s assets.
- Keep all your valuable papers together - insurance policies, wills, bonds, investment records, birth certificates, marriage certificates and social insurance numbers – and make sure your family knows where they are.
- Review your life insurance regularly and be sure to name a beneficiary. Naming your estate slows down receipt of money and increases executor fees, giving more opportunity for the proceeds to end up in the wrong hands.
- Don’t forget to name a beneficiary for your RRSP or RRIF, or alternatively, put an RRSP-RRIF clause in your will. This removes the possibility of a big tax bill. The total value of your RRSP/RRIF can be added to income and taxed at the highest rate and reduce income to survivors. A spousal beneficiary defers this tax.
- Keep some assets liquid so there is cash available to pay bills upon passing.
- Fill out a Net Worth Statement each year that details what your assets are, and what they are worth.
- Most importantly, don’t wait until it’s too late to get your estate in order. Planning ahead makes everything easier for your family and friends.
Sources: CIBC, RBC, Montreal Gazette, Fiscal AgentsPhoto ©iStockphoto.com/DNY59
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