When we talk about estate planning, we’re not just talking about writing a valid will and keeping it up to date (although that’s important too!). Estate planning is difficult for many to think about, since we understandably don’t like thinking of a time when we may no longer be around. Perhaps estate planning even feels actively morbid to you.

But we’re here to tell you that carefully planning your estate is one of the greatest gifts you can give your loved ones. Once you’re gone, they’ll have to sort through your belongings, your assets, and your debt, and perhaps even go to court and deal with high fees and bureaucratic hurdles. Leaving behind a thoughtful estate plan that you’ve discussed beforehand with your loved ones will ensure that they won’t be burdened with unnecessary stress during an already difficult time.

An estate plan is a dynamic and ongoing process that’s meant to ensure that all of your assets are transferred as seamlessly as possible to the person or people of your choosing, with minimal fees, taxes, and time lost to bureaucratic mazes. A good estate plan is always highly personalized to you and your family and loved ones, and everyone’s ideal estate plan is going to look a little bit different.

However, they mostly share the same goals: Reducing the need for probate or even aiming to skip it entirely, strategies to reduce probate fees and taxes so more of the estate is left for beneficiaries, and ensure that beneficiaries have access to their share of the estate as soon as possible.

Estate plans will often also include precise instructions for funeral arrangements, or perhaps even have some sort of pre-arrangement made with a specific funeral home in order to lock in a specific price.

Creating a comprehensive estate plan may seem daunting, but it all begins with an honest conversation with your loved ones. By maintaining transparency and patience throughout the process, you ensure that your wishes will be executed confidently when the time comes. Let's walk through the essential steps to create your tailored estate plan in Ontario:

Step 1: Identify Key Participants:

• Executor: Discuss the role of estate executor with your loved ones and determine who would be able to take on this important responsibility.
• Beneficiaries: Decide who will inherit your assets.
• Power of Attorney: Choose trusted individuals for both personal care and property management.
• Witnesses: Ensure all legal documents are properly witnessed as required by law.

Step 2: Create an Inventory of Assets:

You can't create a solid estate plan without knowing the size of your estate.

Create an inventory and approximate value appraisal of all your assets, including:

• Personal property (clothes, books, family heirlooms, furniture)
• Real estate
• Vehicles
• Financial accounts
• Retirement accounts
• Life insurance policies
• Valuables (jewelry, antiques, rare collectibles)
• Artwork Also, keep track of any ongoing debts that may need to be paid off from your estate.

Step 3: Outline Additional Wishes:

• Funeral Arrangements: If you have specific wishes for your funeral service, include them in your will. Consider making pre-arrangements with a funeral home to lock in today's prices and reduce stress for your loved ones.
• Out of Country Property: The property you own outside of the country is subject to the jurisdiction of the country where the property is located. So if you own a house in the United States, then that property may be subject to U.S. estate tax.

Step 4: Create the necessary legal documents for your estate plan:

• Last Will and Testament: Provide guidance in your last will - cover all your assets, assign beneficiaries, and include your funeral plans and other wishes.
• Living Will (Personal Directive): Outline instructions for your healthcare and personal care in case you're incapacitated.
• Power of Attorney for Personal Care: Designate someone to make healthcare and personal care decisions on your behalf if needed.
• Power of Attorney for Property: Appoint someone to manage your financial assets and property if you become incapacitated.
• Trust Documents: If you decide to use trusts as part of your estate plan, create the necessary trust documents. This might include family trusts, spousal trusts, or testamentary trusts created in your will.

No, an estate plan is not the same as a will in Ontario. A will is just one element of a comprehensive estate plan. Proper estate planning encompasses a broader scope, including several key documents and strategies designed to manage your assets and decisions effectively. These documents typically include:

• Legal Will: Specifies how your assets should be distributed.
• Powers of Attorney: Designates who will make decisions on your behalf if you are unable.
• Trusts: Provides specific instructions for managing certain assets.

Thus, while a will plays a crucial role within an estate plan, it does not encompass the entirety of estate planning efforts needed to ensure comprehensive management and transfer of your assets.

Estate planning requires you to have a lot of important documents that are kept in a safe space, and are accessible to your loved ones when they need them. Here are some of the documents that form part of any solid estate plan:

Last will and testament

As mentioned above, a valid will is the cornerstone of any good estate plan. Your loved ones will need to show your will to the probate court in order to be able to execute your wishes and receive the inheritance you’ve determined for them.

Living will

A living will is also known as a personal directive, and this is a legal document that outlines your instructions for your healthcare and personal care in the case that you’re incapacitated and can no longer advocate for yourself.

Power of Attorney for personal care

While it’s easy to confuse a living will with a POA for personal care, there is a key difference. While a living will establishes specific directions for your care when you’re no longer able to express them, a POA for personal care gives someone else the authority to make healthcare and personal care decisions on your behalf when you’re no longer able to.

This means that instructions don’t need to have been written down ahead of time by you; a POA means you’ve given a person of trust the authority to make decisions for you, whatever those may be (as they’re related to healthcare and personal matters).

Power of Attorney for property

A POA for property gives someone you’ve designated as your “attorney” the power to deal with the sale, purchase, and management of all your financial assets, including real estate, in the event that you become incapacitated.

You can read more about POAs in Ontario here.

Trust documents

While not necessary for everyone, trusts can be valuable tools in estate planning. If you decide to include trusts in your plan, you'll need to create the appropriate trust documents. These might include:

• Inter vivos (living) trust agreements for trusts created during your lifetime
• Testamentary trust provisions within your will for trusts that take effect after death
• Specialized trust documents for specific purposes, such as Henson trusts for beneficiaries with disabilities

Trust documents specify the trustee(s), beneficiaries, assets included, and rules for managing and distributing the trust's assets. They can help with tax planning, asset protection, and ensuring your wishes are carried out as intended.

When we talk about estate planning, it's crucial to consider the impact of capital gains tax. In Ontario, as in the rest of Canada, your estate may face significant tax implications due to capital gains.

Here's what you need to know:

Deemed Disposition: When you pass away, the Canada Revenue Agency considers all your capital property to be sold at fair market value immediately before death. This can result in capital gains tax your estate will need to pay.

Strategies to Minimize Impact: There are several ways to reduce the capital gains tax burden on your estate:

• Use the Principal Residence Exemption for your home
• Consider transferring assets to a spouse, which can defer the tax
• Explore the use of trusts in your estate planning
• Look into charitable donations as part of your legacy

If you're a business owner, your estate plan needs some extra attention. Your business is likely one of your most valuable assets, and ensuring its smooth transition is crucial for both your legacy and your family's financial security.

Here are some key points to consider:

• Business Succession: Who will take over your business? Will it be family members, key employees, or an outside buyer? Each option has different implications for your estate plan.
• Valuation: Understanding the true value of your business is essential for fair distribution and tax purposes.
• Tax Strategies: Business owners have access to specific tax strategies, like the Lifetime Capital Gains Exemption, which can significantly impact your estate planning.
• Insurance: As mentioned earlier, consider how life insurance can play a role in providing liquidity for your estate or funding buy-sell agreements.

As a business owner, your estate plan will likely be more complex. It's important to work with professionals who understand the unique challenges you face. Remember, like all aspects of estate planning, your business succession plan should be reviewed regularly to ensure it still aligns with your goals and the current business environment.

ClearEstate can help

Creating a comprehensive estate plan can feel overwhelming, but it doesn’t have to be. Our dedicated professionals can assist you at every step of the way and ensure you leave no ground uncovered. That way, you can rest easy in knowing that you’ve given your loved ones a wonderful gift: The gift of planning ahead.

Get in touch with our professionals today for a free consultation and find out how we can help you create the best estate plan for you and your family.