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Why Everyone needs an Estate Plan

Planning for the future means planning for those you love and the things that are important to you.

Estate planning secures peace of mind that your loved ones or the causes that hold significance for you will be taken care of after you are gone. It is also important to know the nest egg you have built up in your lifetime will not be eroded by tax. Planning your estate ensures your assets go where you want them to, in a timely fashion and with less risk of argument or legal challenge. While it can be hard to think about your own mortality, being prepared and planning for what will happen to your finances, savings, property and the people and things you hold dear is too important to ignore.

Why do I need estate planning?

Many people put off or avoid creating an estate plan, believing it is only for the very wealthy. The truth is estate planning is for everyone. Regardless of your age, the breadth of your finances or the complexity of your situation, you need to plan today to make sure your beneficiaries are protected and your wishes are carried out. Making a will is an important part of estate planning, but there are many other aspects to consider. Do you have the right beneficiaries designated on your insurance policies and registered plans (RRSPs, RRIFs, TFSAs)? Have you given someone power of attorney so that he or she could handle your finances or make decisions about your personal care if you were unable to do so? These are all important components of an estate plan.

While estate planning is important for everyone, it's particularly important if you are in a common-law relationship. And if you're in a relationship that your family does not accept, there is a risk that they could challenge your will. Make sure that your lawyer is aware of your concerns so that he or she can confirm that you have the legal and mental capacity to make a will. Also, you may want to consider holding property jointly with your partner and naming him or her as designated beneficiary of your registered accounts (RRSP, TFSA, RRIF) and life insurance policies. These assets will then pass outside of the will, protecting your partner from any possible challenges. If you and your common-law partner decide to marry, you will need new wills. In most provinces, marriage often voids prior wills.
How do I start?

There are some hard questions that you need to ask yourself when you begin the process of estate planning. Here are five key points to consider:

  1. Who do you want your beneficiaries to be?
    Most married couples want their spouse to be the main beneficiary, but if you have children from a previous marriage, you may want to ensure that part of your estate goes to them. If you have no spouse or children, you may decide to name a favourite charity.


  2. Who will you name as guardian of your minor children?
    If your spouse survives you, he or she would of course take on this role. But you always have to consider the possibility that you and your spouse could die together in an accident. You may want to ask a trusted friend or relative to step in should this occur.


  3. Who will be the executor of your estate?
    The executor is the person who steps into your shoes after you're gone, winding up your affairs and distributing your assets to the beneficiaries. While this may sound fairly straightforward, many complications can arise. You should make sure that you choose someone who lives close by, so he or she will be available to take on these responsibilities, and who is comfortable dealing with financial matters. Where the estate is complex, or there is the potential for discord among the beneficiaries, it may be best to appoint an independent third party.


  4. When do you want your beneficiaries to receive their inheritance?
    If you're planning to leave money to your children or grandchildren, you may not want them to receive their inheritance too early. Especially where large amounts are involved, you may want to set up a trust. Lump sums can be paid out at certain ages, or the income can be paid out to the beneficiaries each year.


  5. Who should be given power of attorney?
    The executor of your estate has no legal authority to act until after you die. However, there might be circumstances where you need someone to act on your behalf while you're still alive. For example, you could be seriously injured in an accident and need someone to manage your finances until you get better. The power of attorney document appoints someone to fill this role.

The key is to take stock of your situation, identify the financial and personal issues involved, get organized and take the appropriate steps to achieve your goal. There are many strategies that can be used to minimize tax and probate fees and preserve the bulk of your assets for your intended beneficiaries. A financial planner* can help you design an estate plan that works for you.

Why is a will so important?

A will is the legal tool that allows you to control your legacy, to ensure your wealth is distributed in the way you want by the person you choose to administer your estate. If you do not have a will, you give up that control. You can use the estate plan as your framework to help create a will that captures all of your wishes.

Without a will, when you pass away, your assets will be distributed according to provincial laws of succession, which may not reflect your wishes. Your estate may be eroded by higher taxes and probate fees, and settlement of your estate may cost more and take longer.

Types of Wills

There are two types of wills you should be aware of:

  • Holograph Will
    This is a basic, do-it-yourself will that is completely handwritten and signed by the testator. A typed will with the testator's signature will not be accepted as legal. Not all provinces recognize holograph wills. Although not generally recommended, they can be useful in emergency situations where there is no time to prepare a conventional will.


  • Conventional Will
    This kind of will is usually prepared by a lawyer, and is typed and signed in the presence of two witnesses who cannot also be named as beneficiaries under the will. While you don't have to have a lawyer prepare the will, it is strongly recommended in order to ensure that your objectives are met.

Will kits are available both on line and in office supply stores. These kits are designed as a less costly alternative to having a lawyer prepare your will, but buyer beware! You may save a few dollars up front, but you run the risk of creating expensive problems for your heirs by inadvertently using vague wording, issuing conflicting instructions, or failing to consider tax implications. Don't jeopardize their future financial security for the false economy of using a will kit.

Executor resources

Deciding what will happen with your estate is an important part of your overall financial plan. You should think of it as a living document. It should be a reflection of your life at any given time. For example, if there are any changes, such as the birth of a child, marriage or divorce, your estate plan should be revised to reflect the change. It's a good idea to review your estate plan and your will at least every three to five years.

Let's talk. Call a BMO Financial Planner today at

1-888-389-8030




* BMO financial planner refers to Financial Planners, Investment and Retirement Planning that are representatives of BMO Investments Inc., a financial services firm and separate entity from Bank of Montreal.

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