Both Life insurance and the Will are part of the foundation of a family financial planning. However, only about 60% of Canadians have their Will done. This section helps you with the final stage of financial planning - Estate Planning and the Will, which should go hand-in-hand to put your final affairs in order.
Picture this: you've worked hard all your life, squirreling away that hard-earned cash to create a fabulous nest egg for your loved ones. Naturally, you'd want your children to inherit it without the government sticking its nose into your business. But hey, let's be real here, life isn't all rainbows and unicorns!
So, you've got two options: let the government have a field day with your estate, or outsmart them with some strategic tax-saving moves. And guess who's got the secret sauce for this financial magic? That's right, your life insurance advisor, the true hero of your financial tale! Here are some tips for you.
When you kick the bucket, the taxman goes into overdrive, considering all you own as sold - hello, hefty tax bill! But fear not, for there's light at the end of the tunnel. Leaving assets to your spouse comes with a tax-free advantage. There are nifty strategies to reduce tax on the goodies you leave to everyone else! Oh yeah, options are your new best friend!
Separate the sheep from the goats
Divide your assets into tax-triggering ones and tax-free ones. The taxable stuff goes to your spouse, who can inherit it on a tax-deferred basis. The non-taxable gems, on the other hand, go to those beneficiaries you've carefully picked out. Simple, right?
Say goodbye to pesky court battles with inheritances that bypass probate. All you gotta do is invest through a life insurance company and name beneficiaries like a pro. Think segregated funds, GICs, and life insurance policies - they've got your back!
Don't give up by giving away
Now, you might be thinking, "Hey, what if I just give it all away before I kick the bucket?" Handing out your fortune might not be the grand escape you're dreaming of. Sure, no tax consequences for your adult child, but you might end up paying capital gains tax under your name. It will become "six of one, half dozen of the other." (Though the tax bracket could be different, granted.)
Don't hold on too tight either
You might be tempted to sprinkle your cash like fairy dust, but if it's just lounging around in a bank account, there's not much tax to save anyway. Even with a high interest rate environment these days, your savings could be less than 3%. Bummer, right? But fear not! There's still a way to gain some serious tax-saving superpowers - charitable giving while you're still rocking and rolling. Read our Life changing approach to Charitable Giving to learn how to maximize the impact of your donation even with just one lump sum.
Now, here's the deal - no magic spell can entirely avoid taxes at death, but with your life insurance advisor, you can save some serious tax money and leave the most amount to your loved ones.
Contact us to get start your estate planning with benefits that only insurance products could provide.
This article is not an exclusive recommendation for clients. The information contained is as of date of publication, and may be subject to change. This article is intended as general information only, please contact Insurance Kit regarding your specific situation.
Most people only learn about all that entails in the term "Final Affairs" when their parents passed away, and they have become the executor of the estate. Peter (alias) reflected on his experience after his father's recent passing: " I never realized how long it would take to settle one's estate and how much work and money that actually involves!" Lucky for him, his father did have a will set up; otherwise, he would still be dealing with it after 12 months. (The average time it takes to settle an estate).
It’s important to have a Will so that, when you die, your wishes are followed. Your estate will be divided up as you wish, your children and other dependants will be taken care of and your assets will be distributed the way you wish. Having a Will may also prevent legal disputes which can be time-consuming and costly to those you leave behind.
A Will needs an executor. Choosing an executor is a challenging yet necessary decision you must make when preparing your Will. An executor will help execute the wishes outlined in your will, distribute funds to your beneficiaries, and can act on behalf of your business and financial interests when you depart from this world. If you do not choose one before you pass on, the courts will be in charge of appointing an administrator to execute your wishes, and this person may not be someone you would have wanted to act in this role.
Some responsibilities and duties of an executor include:
Being an executor means you do have the right to be paid from the estate for the work you do. However, being an executor also comes with legal responsibilities. If you were asked to be an executor, make sure you understand what it means. A Toronto man lost 7 years of his life and $100K because he took on the responsibilities of being the executor for a friend. Though most of us may not run into the same situation that he did, it does caution us not to take this job lightly.
A Will, along with debt reduction, an emergency fund, disability insurance, life insurance and regular savings, provides a solid foundation on which to build your financial plan – protecting your family now and well into the future. That includes the use of life insurance in estate planning.
Insurance Kit is partnering up with Willful to help families across Canada* to create the necessary legal documents to protect and provide for the people who matter most to them.
Click here for more info.
See how the BC government explains Wills and Estates
*BC, AB and ON only at the time of publication
With our partner Willful.co, we’re on a mission to help families across Canada create the necessary legal documents to protect and provide for the people who matter most to them, through information and affordable resources. Here is the basic that you need to know about setting up a will.
What most people believe they'll need to create a will:
What you actually need to complete your will:
It is where you can create your legal will from the comfort of your
own home. Take advantage of the powerful, secure technology with built-in logic to create legally binding and error-proof documents that are lawyer approved for each province.
With Willful, you can come back and update your choices anytime, free of charge.
Has "writing the Will" been on your to-do list for months, even years? You are not alone: over 57% of Canadians do not have a Will and millions have wills that need to be updated. Here are 7 reason why you need to do it now:
A common excuse we’ve heard from those who have yet to create their Will is “my family will know what to do if I die.” This assumption has caused family friction too often since death, grief and loss can make decision-making highly emotional.
Instead, the process of writing a Will and putting your decisions down in writing takes the burden off your loved ones to guess (and challenge) what your wishes would be. This is the time to tell your chosen executor and guardians that you’ve chosen them, and make sure they are up to the task.
You may have family and friends who love and care for you but still would not be up to the task of closing your estate upon your passing. Your Will is the opportunity to choose the right person as your executor. Someone in your life who you not only trust but who has the capacity—time, energy, organizational skills—to serve in this role.
The person you choose as your executor shouldn’t be written in stone either, as things can change over the course of your life.
When you die without a Will (known as dying “intestate”) provincial legislation will dictate how your estate is distributed and may impact important relationships in your life that are not recognized by these laws. Common-law partners and other dependants you wish to provide for are vulnerable if you die without a Will.
No one wants to think of a tragic event that could leave a child or children without their parents. This thought exercise will never (ever) be easy, but avoiding it altogether is also not an option.
Your Will tells your loved ones and the courts who you’ve entrusted to provide care and support for your child or children. While this decision should not be made lightly, it’s important to get this in writing and avoid the turbulence that could ensue because there was no plan in place. Like your executor, your decision for your guardian(s) can change over time.
Most pet owners would agree that we love the animals in our lives as much as the humans in our lives (and in some cases, maybe even more!). Put in writing who you’d like to care for your pet when you’re no longer able to and also set aside funds to help support your pet’s needs. Make sure you have this important conversation with whoever you choose so they are aware of what is being asked of them.
Your Will is a legally-binding document that lets you determine how you’d like to divide your estate and gives you a place to allocate special gifts of monetary or sentimental value such as books, art and jewelry. Help your loved ones navigate who gets what and minimize the chances of arguments that may arise when wishes aren’t made clear.
You need a Will if you wish to include a gift or donation to the charities you care about after you die (you also have the option to leave a percentage of your estate). Many organizations are supported by legacy giving and allow you to pay it forward to help those who need it most.
There’s nothing worse than walking around with a nagging thought of “I know there’s something I should do, but I’ll just get to it later.” Procrastination is a dark playground where we can never fully enjoy the present moment knowing there’s unfinished business.
Don’t put off until tomorrow what you can do today. We live by this motto and we encourage you to do the same.
If you die without a Will, you’re considered to have died intestate. This means that while the government doesn’t automatically get your estate, it does get to use provincial laws to decide how to distribute your estate and appoint your executor. Your estate includes all of your assets (anything you possess of financial or other value) and any debts. What happens with your estate varies from province to province and it may be very different from what you would have wanted since the government doesn’t take into account the specific needs of individual families.
The first consequence of dying intestate may be shock for your surviving loved ones - family and friends are often surprised to learn you didn’t have a Will. They may also be shocked to learn how much time, money and work will be required before your estate can be distributed. Without instructions on how you want your property to be distributed, what type of funeral you’d like and what you want to be done with your body, there will be delays in wrapping everything up.
Someone will have to apply to the court to be appointed as the administrator (or personal representative) of the estate. The administrator has the same duties as an executor, the only difference is that the administrator can’t begin to act on your behalf until the court gives permission - which can take a while. And if nobody steps up, then the court will have to appoint a public trustee. Having a Will allows for someone to begin acting on your behalf immediately after you die.
If your dependant children don’t have another surviving parent, the court will decide on a guardian for your children. This person gains all of the rights and responsibilities of a parent - and it may not be the person you believe will do the best job. Your kids’ inheritance will be held in a trust until they reach the age of majority (18 or 19 years of age depending on the province). This can make it difficult financially for a surviving spouse to raise a family. It is also often too young for children to know how to properly handle such a large sum of money.
Without a Will, you can’t choose who you’d like to benefit from your estate. This means you can’t leave money to a charity you care about, you can’t leave any gifts to close friends and you can’t set aside money to cover the cost of care for your furry family members. Your estate will be distributed using provincial laws that have very little flexibility.
While individual cases may be handled differently, click here for the breakdown of the typical default procedure for distributing your estate if you die intestate by each province (after your debts are paid).