We hear the term “estate planning”, but often don’t recognize how it pertains to us. It can be a difficult subject to approach, as it forces us to face our own mortality. Estate planning, though, isn’t about death, but about the present and future of our families or loved ones by the orderly transfer and preservation of our wealth to them. This includes the avoidance of unnecessary taxes and administrative expenses (probate, etc.).

The purpose of an estate plan is to provide the peace of mind that comes from knowing the proper steps have been taken to ensure your wishes are fulfilled and your assets are distributed to your heirs as per your wishes.

As I have said before in this column, the foundation of any estate plan is a properly drafted will. This is the document that you utilize as your voice to convey your wishes to your heirs.

The will, though, is only the start of the planning process. Creating an effective estate plan starts with the following steps:

• Depending on complexity, you will need to consult the appropriate professionals: a lawyer to advise you and deal with the legal concerns, an accountant to deal with the tax perspective by minimizing and/or deferring tax and an advisor to help put it all together.
• Prepare a household balance sheet to determine your overall net worth (the value of what you own minus what you owe). Prepare an inventory that represents a detailed list of your assets and liabilities including bank accounts, investments, real estate, personal property, pension plans, mortgages/loans, credit cards, and other personal obligations (family loans, etc.)
• Assess your life and disability insurance needs to determine that you have adequate coverage. This also means making sure it’s the right kind of coverage depending on the point in your life: term (for income replacement), permanent to cover funeral expenses, income taxes and estate administration (probate, etc.).
• Establish an Enduring Power of Attorney to deal with financial and legal matters and a Personal Directive to deal with health care issues in case you are incapacitated and unable to make decisions for yourself. Otherwise the province will step in and make those decisions on your behalf.

Different issues and priorities arise during different stages in your life. Next week we will discuss those stages and the different estate planning strategies needed.

August 7, 2009