Simple Estate Planning Checklist for Canadians

Everything You Need to Know about Protecting and Building Generational Wealth

Written by John Woodfield, Portfolio Manager, CIM®, CFP® and Tiffany Woodfield, Associate Portfolio Manager, CIM®, CRPC®, STEP Associate

Estate planning involves more than just making a will and putting it in a box.

Estate planning in Canada is an in-depth process wherein an individual or family spends time ensuring that everything moves forward smoothly when a person departs. It means planning for health issues, tax planning, and supporting those needing support. Approaching your estate planning can feel overwhelming, so this article and checklist for Canadians will help you get organized and ensure you’ve covered everything.

But please note that this article is intended to offer you a general background on estate planning, so that you understand the importance of making an estate plan. Please note that this article is not a piece of advice. It is always most important to consult an experienced estate lawyer about your estate planning.

TABLE OF CONTENTS

1. Estate Planning Checklist for Canadians
2. Top Components of Estate Planning
3. When To Begin Your Estate Planning
4. How Do I Get Started With My Estate Planning Strategy?
5. Assessing Your Current Estate Plan
6. Essential Documents for Estate Planning
7. Setting Goals for Your Estate and Legacy Plan
8. Estate Planning Steps
9. Is Your Estate Plan Ready?
10. Summary of Key Points

Estate Planning in Canada

The first step in your estate planning is deciding what you would like to happen to your assets upon passing. Once this is completed, it is time to structure your affairs so that everything is in order. This overview will help you through the process.

 

Estate Planning Checklist for Canadians

Take a look at these items and make sure you’ve considered each one.

1. Will and Executor/Personal Representative:

This is the starting point of all estate planning. A will is a legal document that makes it clear how you desire your assets to be distributed and ensures that your dependants are cared for. An executor is the legal representative named in your will to handle your estate.

2. Beneficiaries:

These are the people who inherit your assets, as stated in your will or if you have named direct beneficiaries of registered plans or insurance.

3. Estate Taxes:

In Canada, all assets are deemed to have been sold immediately before death. This means it is as if you sold everything immediately before you died. This event creates a tax liability owed by the estate.

4. Life Insurance:

Life insurance is a tool that creates a pool of money upon passing. It can help create an estate, preserve an estate, or equalize an estate.

5. A Power of Attorney for Finances:

This document gives a substitute decision-maker the authority to make financial decisions and deal with assets on your behalf. For example, you may give authorization, even if you can manage your own affairs or only if you are no longer capable of doing so.

It is vital to understand that, even as a married couple, you will not be able to manage your spouse's affairs automatically. You will need to give your spouse the power of attorney if you want them to handle your financial affairs when you are no longer able to. In many cases, even when you are selling your principal residence, both owners need to consent, so adding one as a joint owner will not generally eliminate the need for a power of attorney.

6. A Power of Attorney for Health Care:

This is also referred to as a health care directive, representation agreement, personal directive, or advance care directive. This is a detailed document that appoints someone to make healthcare decisions on your behalf. Unlike a power of attorney for finances, a personal directive only comes into effect upon mental incapacity.

The person you designate as your healthcare attorney will generally be limited to making decisions that deal with your physical body and physical environment, such as health care, accommodation, participation in social activities, nutrition, and decisions regarding medical information. Although we do not like to imagine a personal disability, we are living longer, and many people experience a permanent or temporary disability at some point in their lifetime.

7. Trusts:

Trusts are a method by which assets can be held by a trustee for the benefit of a beneficiary under specific parametres. Trusts are often used as a tax planning strategy or a technique to preserve assets for beneficiaries. For more information on trusts in Canada, please read our full blog on this topic.

8. Digital Assets:

We have many assets on computers, such as digital files or media accounts. It is important to list digital assets and passwords.

9. Charitable Acts:

You may choose to leave a legacy by making a charitable donation during your lifetime or at the time of your death. The maximum contributions eligible for the tax credit usually cannot be greater than 75 per cent of your net income, but in the year of death and the year before death, this limit is increased to 100 per cent. You should speak to a professional advisor, so that your gift can create the most significant benefits for you and for the charity. To receive a charitable donations tax credit, which reduces the income tax to be paid, you need to ensure that you donate to a “qualified donee.” Speak with your estate planning attorney about this.

List of Charities and Other Qualified Donees - Canada.ca

10. Professional Advice:

Wills, estate strategy, insurance, financial planning, and investments are all areas that need professional advice. Seek out professionals you can work with and make sure they are all in contact with each other, so that you can create a personalized and well-connected strategy.

Top Components of Estate Planning

Many people believe you only need to do estate planning if you are “wealthy” or “old.” This is not the case; everyone needs an estate plan, particularly if you have young children.

There are several components of an estate plan. The chief components are as follows:

• your last will and testament;
• beneficiary designations on insurance products and registered investments such as a Registered Retirement Savings Plan (RRSP) or an Individual Retirement Account (IRA) if you worked in the U.S.;
• survivorship provisions on any jointly held property.

People often mistakenly assume that having everything held jointly means they do not need to do estate planning. Sometimes, they add one of their children as the direct beneficiary to an RRSP to save probate fees. They do not consider that their estate would then be liable for the taxes and might result in their estate being divided unequally between their children.

In addition, if you have children who are minors, you will want to plan for who will take care of them, in case both you and the child’s other parent were to pass away.

Next, there exists a common misconception that, if someone passes away without leaving a will, their spouse will inherit everything. In most provinces in Canada, this is not the case once you have a child. The spouse may get a preferential share and a portion of the estate, but the children are entitled to a portion of the investments and house. This situation can cause complications if there is no will.

Finally, if you’re a dual citizen or have cross-border wealth, you need to take into consideration cross-border estate planning issues and work with a financial advisor who specializes in dealing with cross-border complexities.

 

When To Begin Your Estate Planning

Life is unpredictable, so do not wait to make an estate plan. Remember, your estate will be distributed according to a provincial formula if you die without a will. There are many factors to be considered when you begin estate planning. The first step is to consider your situation, decide your goals and needs, and then contact an estate lawyer. They will be able to guide you and ensure that you take the proper steps.

 

How Do I Get Started With My Estate Planning Strategy?

To start your estate planning strategy, you need to use the services of a professional lawyer for creating a will, a power of attorney for property, and a power of attorney for health care. You need to determine the following: the distribution of your estate, the guardian of your children, your personal representative, and your power of attorney holder/s.

Further, a lawyer will guide you about protecting inheritances from family property claims, tax planning strategies, and some of the limitations on testamentary freedom. For example, each province has laws about dependants’ relief or wills variation legislation, which may allow certain family members to make a claim against your estate.

 

Assessing Your Current Estate Plan

Everyone has unique circumstances; you should not assume that your situation is simple. There are several dynamic parts of an estate plan that might differ, depending upon where you live, if you have children, own a business, are a non-resident beneficiary, or have been recently separated.

An experienced estate lawyer will be able to guide you about protecting your assets, your estate, and your heirs. Your estate plan and the documentation of your will and power of attorney must be reviewed periodically for changing circumstances. Remember, all this is not just for you. This is intended to guide your family if/when something happens to you.

 

Essential Documents for Estate Planning

Will
A will is a legally binding document, which outlines how you want your assets to be distributed after you have passed away. If you die without a will, your assets will be divided according to the intestacy laws in the jurisdiction where you resided when you passed away. It would usually happen in a manner different from your preferences.

Power of Attorney
A power of attorney for property gives another person the authority to manage your assets and finances, when you cannot do so. There might be occasions wherein you may authorize someone to act as an attorney for your property, even if you are mentally capable but choose not to do this yourself. Many people think they do not need a power of attorney when they have a will.

However, remember, a will does not come into effect until you die. Even when you are married, you should not assume that your spouse automatically possesses the right to act on your behalf; you will still need to sign a power of attorney.

Health Care Directive

If you would like someone else to be able to make healthcare decisions on your behalf when you are no longer mentally capable, you will need to sign a document called a health care directive*.

(*The name of this form varies as per the province. Speak to your lawyer to determine what it is called in your jurisdiction.)

Trust Agreement
A trust is a relationship wherein assets are held by one person, the trustee, for the benefit of another person, the beneficiary, with certain conditions. A trust is not a legal entity. A trust agreement outlines the terms of the trust and the powers of the trustee, who has a fiduciary duty to act in the beneficiary’s best interests.

A few common situations where trusts are useful are listed below:

• if you wish to leave money to a child, but do not want them to have access to it until they reach a certain age;
• if, in a blended family situation, you wish to leave something to your children from a previous marriage and your new spouse;
• when you have a child with a disability, and you want to ensure they can still qualify for social assistance;
• when you have a family business, and you want to do an estate freeze.

Insurance Policy
Insurance often plays a vital role in estate planning.

There are three key reasons why individuals need life insurance along with estate planning.

1) Life insurance can help create an estate, if you have young children and still have a large amount of debt. If something were to happen to you, the insurance could be used to pay off your debts as well as create a cushion to assist your family.

2) Life insurance can help preserve an estate. If you have assets that have increased in value, your tax liability is likely to increase, and when you pass, your estate will have to pay the taxes. To counter this, you could purchase insurance, so that your beneficiaries would not necessarily be forced to sell an asset such as a vacation property just because they need to pay a tax bill.

3) Life insurance can also help equalize an estate. If you wish to distribute assets equally among your children, but the tax liability on each asset is different, you can use insurance to help equalize the value and thus ensure that everyone is treated fairly. The insurance will create liquidity, so assets do not need to be sold unnecessarily.

Organ Donation Form
For many of us, it is vital that our passing helps others. Filling out an organ donor form will enable others to live and vastly benefit. It is a priceless gift.

Business Succession Plan
Business owners must have a plan in place to wrap up or continue their business. This involves planning, funding, and discussions with stakeholders. Those with business partners often utilize insurance as a buy/sell agreement. It enables the surviving partner to maintain the business while the deceased’s family receives payment for their share of the company.

Other Estate Planning Documents to Consider
You must consider the entire wealth planning process when creating your estate plan. When creating a well-executed estate plan, you not only need to evaluate your current will and power/s of attorney, but you will also need to review your entire wealth management plan.

Some additional documents to review are as follows:

• current insurance
• pensions
• current financial plan
• beneficiary designations on registered investments
• survivorship provisions on jointly held property
• corporate succession plans
• partnership or shareholder agreements.

 

Setting Goals for Your Estate and Legacy Plan

Spend time organizing your documents and considering your final wishes. If you have family that is dependent financially on you, or if you have a business, this adds additional items to your planning. To make the process smoother, break your goals into personal, family, business, and charitable giving.

 

Estate Planning Steps

Does estate planning have to be done in a particular order? Yes, and the steps are listed below.

1. Spend time thinking about your beneficiaries and their specific needs.
2. Seek out the necessary professionals who can assist you.
3. Create or update your will.
4. Check or establish the powers of attorney and health care directives.
5. Look for ways to reduce estate tax (planning, insurance, charitable giving).
6. Put everything together.

Is Your Estate Plan Ready?

None of us like to think of a time when we are no longer here to protect and be with our loved ones. While we cannot control when or if we pass away, we can choose to take positive steps to make life easier for those we leave behind. Creating an estate plan helps reduce potential conflict, plan for taxes, and ensure your wishes are followed. Think of your will as your last love letter, continuing to guide and protect your loved ones.

Speak today to a qualified estate lawyer about your specific situation and seek assistance for creating your own estate plan.

Summary of Key Points:

• Remember this checklist is general in nature, and to take the first step, you need to speak to an estate lawyer about your situation. 
• Estate planning in Canada includes making a will, choosing beneficiaries, planning for taxes and healthcare decisions, consulting professionals, and creating legal documents.
• Common mistakes include assuming spouses or joint account holders will automatically inherit everything, leading to legal or financial complications.
• Start estate planning with essential documents and legal guidance for unique needs.
• Consider insurance, organ donation, and business plans; periodically review all documents.
• Estate planning eases future conflicts, plans for taxes, and ensures your wishes are honoured. 

Next Steps

If you’re a Canadian resident or are planning on moving to Canada and need assistance with moving and optimizing your investments, estate planning, wealth management and portfolio management, please get in touch. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management.

More Wealth Management Articles and Guides

If you’re planning a cross-border move or are living in Canada currently, these articles and guides will help you ensure your estate planning and retirement planning are optimized.

Family Trusts in Canada for Estate Planning and Wealth Management

Cross-Border Estate Planning Guide

Retiring to Canada - A Financial Planning Guide

Financial and Tax Planning for U.S. Citizens Living in Canada

Canadian RRSP Facts for Dual Citizens, Expats and Canadians

About the Authors

Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the USA, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC) a STEP Associate and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and want to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe, whether they live in Canada or the U.S.

John Woodfield is a Financial Management Advisor (FMA), a Chartered Investment Manager (CIM), and a Certified Financial Planner (CFP), and in 2007 was inducted as a Fellow of the Canadian Securities Institute (FCSI). As a portfolio manager and CFP®, he works with clients across Canada. John Woodfield’s clients are families, individuals and business owners who understand the importance of comprehensive wealth and investment plans driven by the lifestyle they want to lead.

 

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