Navigating will and estate planning in Canada

Mature hiking couple relax on sunny mountain ridge in the morning

Planning for the future can be daunting, but having an iron-clad will and estate plan is essential to ensure your assets are distributed according to your wishes and provide financial security for your loved ones.

"Most people leave what they have to their loved ones, and if you die without a will, you are causing a big burden on your family members during an already very emotional and distressing time,” says Jennifer Lewis, associate lawyer at Torkin Manes.

We spoke to Jennifer for some guidance on navigating the will and estate planning process, including the importance of having a will, understanding its components, and the benefits of estate planning.

The estate planning process checklist

No matter how many possessions we own or how much money we have in the bank, we all have an estate. The estate planning process covers a range of important activities, including taking stock of your assets (including digital assets), creating a will, choosing executors and beneficiaries, purchasing life insurance or final expenses insurance, and more. In a nutshell, it’s the process to make sure your wishes are followed after you pass away, and life insurance ensures that you and your loved ones have the financial support to make those wishes come true.

Step 1: Know the essential components of a will and estate plan

If you’re on board with estate planning, so far so good. Time to familiarize yourself with some key definitions:

  • A will: A will is a legal document that allows you to govern how you want your assets distributed on death. It also allows you to appoint executors.
  • Executor/estate trustee: This person or people is/are appointed to administer your assets in accordance with the wishes contained in the will. You can nominate as many executors as you would like for different reasons. An executor can also be an institution like a bank.
  • Estate: An estate includes all your assets, properties and liabilities at the time of death. Everyone has an estate, regardless of how much or how little they own. Debts and personal taxes that remain after you pass on are usually paid out of your estate before any assets can be inherited by the people you choose, called your beneficiaries.
  • Beneficiary: People who are receiving the assets.

The estate planning process can also involve considering insurance. For example, final expenses insurance can help your loved ones cover immediate expenses – including funeral costs – after you pass away. This is a big benefit because even with a well-organized estate and will, receiving assets can take time. Final expenses insurance helps make sure there’s money on hand right when it’s needed.

Step 2: Understand the importance of having a will and estate plan

The benefit of estate planning is that it ensures what you want to happen after you pass away actually does. Most Canadians think that regardless of age, everyone should let their family know what their final wishes are if they’re to pass away unexpectedly, according to our research. Still, only about half of us have an up-to-date will on the books.

“You want to have the autonomy to deal with your assets the way you want and not the way a government or a statute would decide — which is what would happen if you don’t have a will,” Jennifer says.

A legal will creates control over asset distribution and how debts will be paid. It ensures that your assets are allocated to the people and organizations you care about most, giving you control over your legacy. Without a will, your estate may be distributed in a way that doesn't align with your intentions. For example, people are often surprised to know that if you’re married and die without a will, your spouse doesn’t automatically inherit everything. Every family looks different, and the law unfortunately doesn’t always favour who you think it should, unless you make your intentions known in advance.

Estate planning can also reduce family conflict. “A lot of what we're navigating is complicated family dynamics,” Jennifer says. “It can get very emotional.”

Along with being an emotionally taxing experience, it can also be an expensive one. When someone dies without a will, the court process to name an executor and ultimately decide what happens to their assets usually involves getting a lawyer.

Using time and money to complete a will in advance can save your loved ones from that costly and drawn-out headache. A clear, well-drafted will helps prevent disputes among family members after your death. When your intentions are explicitly outlined in a will, there is less room for misinterpretation or disagreement among your loved ones. A will can even provide instructions for resolving potential disputes.

Step 3: Make sure your will is legal

There are several ways to have a legal will in Canada and you may not require a lawyer’s assistance. Printed or online will kits, for example, are legal when followed correctly and signed by witnesses. “It's worth investing in proper advisors so that you can sleep easy at night knowing you have a proper plan in place,” Jennifer says.

Whether you choose to use a lawyer for estate planning or creating a will depends on your budget, but also the complexity of your estate. People with multiples properties or businessowners, for example, might be better off using a lawyer, while those with more straightforward estates can benefit from online will creation platforms.

Regardless of how you do it, you’ll need to gather information on your family, assets, and liabilities.

This could include details about your bank and investment accounts, life insurance, real estate, digital assets, and more. Your family background, citizenship, residency, and where assets are located also all come into play, because different laws and estate tax regimes exist in other places.

Once you have a full picture, you can decide how you want your estate to be distributed to your beneficiaries.

Step 4: Pick the right executors

“Think carefully about who you trust that has the ability to administer your estate,” Jennifer says. “Basically, pick the right people for the right roles.”

An executor should live in Canada (to avoid tax implications of being a non-resident) and have financial skills but also know their limits. You need someone who would be comfortable retaining a lawyer, accountant, or investment advisor to assist if need be.

Insurance and your will

Insurance is a helpful tool in estate planning. On your death in Canada, you're deemed to have disposed of all your assets at fair market value. In some cases, that could mean big capital gains tax owing on death. Final expenses insurance is one way to ensure there's enough on hand to pay those taxes, among other costs to cover.

Creating a comprehensive will and estate plan is crucial for protecting your loved ones’ futures and ensuring your assets are distributed according to your desires. So, don't wait until it's too late. Taking a few key steps now can secure your legacy and safeguard your family's well-being.

Final Expenses Insurance

Did you know you could leave your loved ones with up to $25,000 to help with your final expenses? From the cost of a funeral service to leftover bills, final expenses don’t have to be a burden to your loved ones. FiftyUp Final Expenses Insurance can help by providing a fast payout that can go towards immediate costs shortly after you pass away, from a funeral to outstanding debts and more.