Special to the Financial Independence Hub
Creating a will can be an emotional experience, but it’s an important step in ensuring peace of mind for you and for your loved ones. According to our recent survey, it was surprising to learn that half of Canadians do not have a will, a crucial step in allocating assets after death.
Moreover, more than a quarter (28%) of Canadians without a will are between the ages of 53 and 71. Even more concerning is the stat that 39% of boomers have not even discussed estate planning wishes with their children.
The risks of not having a will are two-fold: first, the government can intervene and distribute your assets which could mean that your wishes are not fulfilled; and second, not having a will can create unnecessary conflict and animosity among members of the family during an already difficult time.
The survey found that one in five Canadians (19%) who received a family inheritance say they experienced conflict with their siblings and other relatives over the division of those assets, with two in five (41%) saying they considered taking a smaller share of the inheritance to maintain family harmony.
Although some may believe estate planning is only necessary for those with significant financial assets, the truth is that it is essential for everyone, regardless of the total value of assets. To help manage your estate and avoid potential tax implications and family conflicts, we offer the following tips:
Items like the family home, summer cottage or jewelry are all considered property assets, regardless of what they’re worth. A professional appraisal is an important starting point for valuing these assets. Once you understand the dollar value, you can get a sense of how to distribute them among your loved ones.
Check online to find a listing of local appraisers or ask your lawyer for a referral. Keep in mind some items may mean more to some family members than to others. Something that you may have strong feelings over, like the family cottage, may not have the same sentimental value for your children. You can then factor these sentiments along with overall value into your estate planning decisions.
Cash and Investments
Since these assets are measured by monetary value, it can be relatively straightforward to divide them among loved ones. In Canada, money received from an inheritance is not considered taxable, but a deceased person’s estate has to pay taxes on any income, including investment income, before money can be distributed to beneficiaries. It is important to review these assets to understand their value and tax implications.
Succession planning should be a priority for anyone who owns a family business. Having a plan that outlines what should happen with the business can help to ensure a smooth transition. If you intend for specific family members to inherit or to run the business, the designated successors should be involved during the succession planning and implementation process to ensure they are comfortable taking over and the family business to help ensure its continue success.
Again, regardless of the types of assets you hold, it is important to review your estate plan at least every three to five years or when a significant life event occurs. Use our TD Estate Planning checklist to help manage the points mentioned above.
Rowena Chan is Senior Vice President, Financial Planning, TD Wealth, TD Bank Group. Based in Canada, Rowena is responsible for the strategic direction of the Financial Planning business and the Mass Affluent strategy for TD Wealth. Rowena is a member of TD’s Women in Leadership Committee and the Graduate Leadership Program Advisory Council.