Talking about death – and planning for what we want to happen to our assets after we die – can be an uncomfortable topic for many Canadians. But estate planning is incredibly important for a number of reasons. If you have minor-aged children, it allows you to spell out your wishes for their care. And if you have assets, it allows you to designate beneficiaries whether they be family members, your favourite charity, or a combination of both.
But just because you know that estate planning is important, doesn’t necessarily mean you know what to do about it. For example, is just having a will enough? Do you need a trust as well? And what’s the difference?
What is a will?
A will is a legal document that provides instructions on what is to be done with your assets after you die. In your will, you can appoint your executor, designate guardians for your children, name your beneficiaries, and provide instructions as to how your beneficiaries are to receive their inheritance.
When a person dies with a will, that will must go through probate before assets may be distributed to the beneficiaries. While this may sound intimidating to some, all it really means is that a judge must verify that the will is legal and valid. The executor of the will, will then have the legal authority to pay off outstanding debts out of the estate and distribute the inheritance to the beneficiaries.
Where probate gets trickier is when a person dies without having a will – this is called dying intestate. When a person dies without a will, the estate can take much longer to settle and it can be much more costly to do so – particularly if litigation is necessary.
Not only does dying without a will make things more complex legally, but it can cause deep rifts within families if there are family members who cannot agree on what the deceased’s intentions were for their estate.
The bottom line is that if you do not already have a will – or if it has been a while since you’ve updated your will – you need to make an appointment with your lawyer to ensure that your wishes are clearly spelled out in this legal document.
What is a trust?
A trust is a legal entity which is created for the purpose of protecting your assets. Unlike a will which comes into effect after death, a trust comes into effect immediately and the trust becomes the legal owner of your assets. Typically trusts are only used by the very wealthy since they can be expensive to draw up.
The most common form of trust is an irrevocable trust. Once you put your assets into an irrevocable trust, you cannot take them out again.
There are several reasons for creating trusts. Unlike wills, they do not go through probate and they do not become a matter of public record which is appealing to those who which to keep the details of their estate private. But the main reason why people have trusts is for the tax advantage. In a trust, the first $11.4 million (for a single person) or the first $22.4 million (for a married couple) is not taxed. Additionally, if you have a large enough estate, you may also gift an additional $11.4/$22.4 million tax-free.
Contact Mikhailitchenko Law Office Today While talking about death is not an easy thing, having proper estate planning in place is one of the best things you can do for your family. Contact us today to set up an appointment with one of our lawyers.