Planning your legacy

Published August 12, 2021
 Man in jeans shirt with his wife signing paper work

Many people assume planning their legacy is something that only happens much later in life, for example, after retirement or after kids are grown. However, we believe that it's important to ensure your family, financial, and medical affairs are in order, not only later in life, but at any age. With that in mind, let’s explore some of the key elements of your legacy and estate plan.

1. Wills

Your Will is a legal document that formally expresses your final wishes, and how you want your estate to be divided after your death and names an executor to handle your final affairs. An up-to-date Will can help ensure your assets go to your intended heirs after your death, as per your wishes. Some people think Wills are only for old folks, but a Will is something that every adult needs, regardless of age, health, or family situation. Although you are not legally required to prepare a Will, without a valid Will, the government determines how your estate is settled. Many people are under the impression that preparing a Will is a cumbersome and costly process. While that may be the case for some individuals with very complex situations, the vast majority of Canadians can have a Will prepared without significant expense, as there are many affordable options for preparing Wills today.

2. Life insurance

There are many different types of life insurance policies available, and there are some important advantages and disadvantages to both term and permanent life insurance. For example, if you want to leave an inheritance to a child or grandchild, or a legacy to your favourite charity upon your death, a permanent policy may be the better option. In a case such as this, the insurance isn’t intended to address a temporary need or goal but rather to help fulfil an estate planning objective. Given the reality that term products eventually expire, a permanent life insurance policy would therefore likely be a better choice to address legacy planning objectives. Working with your financial advisor to better understand your own unique personal situation will help you determine which type of policy is best suited to your situation.

3. Beneficiary designations

In Canada, life insurance policies and registered plans such as Registered Retirement Savings Plans (RRSPs) allow for a named beneficiary. It’s important to make sure you have your beneficiary designations set up properly, as getting this wrong can prove costly. While you can name your estate as beneficiary of life insurance policies or registered investment plans, there can be a number of key benefits to designating a named beneficiary – reduced probate fees, efficiency, creditor protection and privacy. By using a named beneficiary on registered plans and life insurance policies, those assets remain outside of your estate and pass directly to the beneficiary. This allows those assets to avoid probate and pass to your intended heirs efficiently and without delay. Furthermore, designating a named beneficiary on registered plans and life insurance policies helps ensure those assets are protected against potential creditor claims. In some situations, however, the estate should be named as beneficiary — consulting a legal professional for advice as part of the overall estate plan.

4. Trusts

Rather than using a Will to distribute your assets upon death, you may consider transferring assets into a trust during your lifetime. A trust established during your lifetime is called an inter vivos trust, and is often set up to benefit family members. The use of trusts is particularly effective in complex situations with significant assets, or when there is a risk that your Will may be contested by family members or creditors. Additionally, when you transfer assets into an inter vivos trust, you can establish the terms of the trust in the trust document, thereby gaining an additional measure of control. For example, the use of an inter vivos trust gives you control over the timing and amount of distributions that each of the trust’s beneficiaries will receive. Inter vivos trusts are becoming increasingly common way to manage assets and structure a legacy.

5. Medical care

Who will make medical decisions for you if you become incapacitated? Who has the knowledge and the authority to carry out your wishes if you can’t communicate them yourself? A Power of Attorney is a legal document that gives someone else the authority to make certain types of decisions on your behalf. Powers of Attorney are valid only while you are alive, and end upon death. In general, there are two main types of Powers of Attorney, each with different intended purposes and functions. While a Power of Attorney for Property involves decisions relating to your property and finances, a Power of Attorney for Personal Care gives authority to someone else to make medical and/or personal care decisions on your behalf, such as matters involving dietary considerations, living arrangements, or end-of-life decisions such as blood transfusion and artificial resuscitation.

So, how exactly do you get started on your legacy plan? A team approach is best. Your Edward Jones financial advisor can work with you, your family, and your team of legal and tax professionals to put your strategy in place for you.

Important information:

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.