How do you plan for the transfer of your estate?

What is succession planning and why is it important?

Succession planning is a game plan that outlines all the important actions and decisions to follow. Basically, it entails:

• Getting your wishes in writing as they relate to the inheritance of your assets when you pass away.
• Detailing your wishes as much as possible to avoid any disagreements between your loved ones.
• Covering a breadth of possibilities beyond just death. For instance, you can designate a person to manage your estate in case you become incapacitated. Should you have a stroke or a degenerative disease like Alzheimer’s that results in a loss of independence, you’ll be better off if you had planned for this possibility.
• Setting up mechanisms to protect one of your inheritors if you think they won’t be able to manage a significant amount of money themselves. 
• Choosing the main people who will be involved in managing your estate.

What are the benefits to planning your estate?

• Transferring your assets peacefully: Dealing with the death of a loved one is difficult. By planning ahead, your loved ones can grieve without having to decipher your last wishes.
• Respecting your wishes: The more your wishes are precise, the less chances there are that they won’t be honoured.
• Some form of protection in case of incapacity: It would be wise to designate one person or several people to take care of you and manage your assets. Without the power of attorney, it may be more difficult for your loved ones to gain access to your bank account in order to pay your bills or sell a car you no longer use.
• Building a tax strategy suitable to your situation: If you’ve outlined your net value in detail prior to your passing, professionals will be able to help you minimize the financial impact when your assets are being distributed, like by reducing the tax to pay on your income and/or on capital gains, or by setting up a tax-free transfer of your registered retirement savings plans.

At what age should you plan your estate?

You don’t have to wait until you reach a certain age to work out the details of transferring your estate. Whether you’re a parent to young children, an investor with major financial assets, an entrepreneur, or a retiree, the sooner you plan your estate the better.

What are the seven steps to planning your estate?

1. Define your objectives

This should be at the top of your list of priorities, before you even sit down to write your will. Talk it over with your bank advisor or financial planner.

You should ask yourself what you want for your loved ones after you pass, and how your assets could help them. The idea is to prioritize your estate goals, even if it isn’t always easy.

Try asking yourself if you’d like to:

• Give your children or grandchildren access to post-secondary education.
• Allow your loved ones to maintain a certain lifestyle.
• Transfer your home ownership to your partner, which is particularly important if you’re a common-law couple. Otherwise, they may have to mortgage or sell the home upon your death if they are forced to buy your half of the property that was inherited to your children.
• Decide who will take care of you if you become incapacitated, and what will happen if you fall ill or lose your independence. Plan conservatively, or pessimistically, even. It’s best to prepare for the worst and have already set aside funds for home health care before choosing which investments to leave to your niece.
• Transfer part of your ownership during your lifetime. Contributing a significant amount to your grandson’s RESP is certainly gratifying. But do you have enough assets to fulfill your needs for the rest of your life as well as gift them that amount of money? As with anything else, weigh the pros and cons before leaving an inheritance during your lifetime.
• Make planned donations. Are you considering making a donation to causes that are near and dear to your heart? You can leave them assets that generate capital gains by making a planned donation, setting up a foundation, or naming a charity as a beneficiary in your insurance policy.

2. Make a detailed account of your situation

Take inventory of your possessions and gather all the documents you need for your bank advisor or financial planner to accurately analyze your situation. Plus, it’ll be easier for your loved ones, who won’t have to manage all of this after you pass away.

• Legal documents: Marriage or civil union certificates, co-ownership or shareholder agreements, separation or divorce papers, etc.
• Tax and financial documents: Income statements, investment statements (RRSP, TFSA, etc.), retirement plan statements from current and/or past employers, loan certificates, debt records, investment certificates, etc.
• Insurance and other documents: Life insurance policy or policies, certificate(s) of authenticity for artwork or collectibles, birth certificate(s), schedule of assets, etc.

Your succession plan starts with a better understanding of your financial statement.

→ Create a balance sheet now

If your situation changes (divorce, new union, purchase of property, birth of a child, etc.), review the information in your inventory and schedule of assets. Most of all, keep all these documents in a safe place and let your loved ones know where they are.

3. Select all the key figures

When planning your estate, you’ll have to designate several key people who will help ensure your wishes are respected. Consider designating replacements in case certain people are unable to fulfill their roles.

Here’s a list of key figures and their roles:

• The liquidator (in Quebec) or executor (in the rest of Canada) of a will: They will have major responsibilities, such as liquidating the estate, paying off debts, filing taxes for the deceased, distributing the assets among the inheritors, etc. The executor of your will can be one of your inheritors, an outside person you trust who will be able to manage your estate, or a professional executor, such as a notary or a trust company. Regardless, we recommend that you inform the person you choose.
• The trustee: They manage your assets and execute the wishes of the testator (you) in the interest of the beneficiaries. This role is particularly useful if there’s a complex family situation (such as a blended family with children from different parents) or if you want the inheritors to receive their inheritance money at a certain age, for example. The person you choose to manage your trust should be reliable and have a good understanding of the family dynamic.
• The legal guardian: They protect the children and the assets they inherit. It’s crucial to plan for what will happen if you and your partner pass away when your children are still minors. Designate a trustworthy person who’s close to you and your children, and let them know, because this role involves much more than just financial management.
• The mandatary: They take care of the person or their assets in case they become incapacitated. For example, your mandatary may decide to put you in a home. Since both money and quality of life are involved, you can designate two mandataries: one to manage your assets and another to take care of your well-being.

4. Write your will

Estates with a will usually take less time to sort out and are simpler to manage. Regardless of the kind of will, the most recent one will prevail upon your passing.

There are three kinds of wills:

• Holographic will: You write it yourself on paper, but it must go through a verification process upon your death.
• Will made in the presence of witnesses: this type of will can be prepared by yourself or an unbiased third party, such as a lawyer or notary. In this case, the lawyer can ensure the testament's compliance with the law, preserve it, and register it with the Barreau du Québec 's Register of wills and mandates. This type of will will also require a probate upon your death, but the process will be simpler than with a holograph will.
• Notarial will: with this type of will, the notary will ensure compliance with the law, preserve the will, and register it with the Chambre des notaires du Québec's Register of Testamentary Dispositions. In this case, the testament does not need to be probated upon your death.

If you pass away without a will (ab intestate), the Civil Code of Quebec has rules for designating the beneficiaries and distributing your assets.

In Ontario, the Succession Law Reform Act (external link) outlines these rules and dictates how an estate is distributed. For other provinces and territories, please refer to the relevant laws.

5. Sign up for life insurance if needed

It’s often the basic level of financial protection for your loved ones after you pass away. A life insurance is not taxable and the money can be used to pay your taxes or cover your funeral. Choosing your beneficiaries is important.

Before signing up for this kind of insurance, you should first figure out whether you can achieve your goals without it. If not, determine how much money you need to reach your goals and select your policy accordingly, especially if there are probate fees or debts to pay after you pass away.

6. Optimize your strategy

A tax expert or other professional could help you make sure that everything is in order; they could even point out ways to optimize your financial plan.

Your estate will have to pay tax on capital gains, tax on the balance of your registered retirement plan income, and depending on the province, probate fees calculated on the value of the estate (there may be probate fees if you own a cottage in Ontario, for example). Let your loved ones know that they should speak with a professional before liquidating your estate. This may allow them to possibly use a better strategy and reduce the tax impact before everything is sold off.

→ National Bank Trust has offered specialized trust and asset management services.

If you own a business or own shares in a company, those shares are part of your estate. This is more complex, so speak with an expert in banking solutions for businesses in order to build a personalized strategy for your estate.

7. Give your loved ones peace of mind

By taking care of other matters related to your death, you’ll be giving your loved ones peace of mind. They will be able to grieve without having to make quick decisions about your affairs.

• Make funeral arrangements beforehand and try to minimize your funeral costs.
• Make your consent to organ and tissue donation official. Your decision is valid for your entire life. Go here to find out how in Quebec and here for Ontario. For other provinces, visit the Government of Canada’s website.
• Describe your wishes in writing in case you become incapacitated and are unable to consent to care such as cardiopulmonary resuscitation or forcible feeding. In Quebec, there’s an online form you can fill out.

In any case, make sure to inform your loved ones of the steps you’ve taken. Estate planning is a complex but necessary process that’s unique to each individual. No one likes thinking about their own death, but try to think of estate planning as an act of love towards your loved ones. Feel free to speak with an expert for guidance.