The Importance of an Estate Plan

by Karen Aujla

It is never too early to start estate planning. A well-thought-out estate plan can ensure that your money and assets benefit the appropriate people and that your family is cared for should something happen to you. However, the value of estate planning is often overlooked. Preparing your own estate plan for the future can start with understanding the importance of British Columbia’s intestacy laws, incapacity planning, probate, and trusts, as described in the following.

Intestacy
When a person dies without having made a valid will, that person is said to have died ‘intestate.’ When this occurs, the Wills Estates and Succession Act sets out the distribution of the estate. However, intestacy laws do not account for nor carry out any particular wishes of the deceased, which may include: legacies and bequests of a specific property to family, friends, and/or charities; deciding who to put in charge of the estate; funeral and burial wishes; tax considerations; and guardians of minor children – all of which are just some of the benefits of a well-planned estate plan.

Incapacity Planning
Other benefits of an estate plan include incapacity planning. No one plans to be incapacitated, but accidents or unexpected illnesses do occur. In such cases, incapacity planning can ensure that a person’s wishes will be respected at a later date, as they may need to rely on someone to make decisions for them. Agreements that would authorize someone to act on their behalf if they do become incapacitated include a Power of Attorney and a Representation Agreement.

Probate
Individuals can also benefit from estate planning by minimizing probate fees. Probate is an approval process that validates the will and confirms the appointment of the executor under B.C. Laws. Whether a will needs to be probated depends on the agencies and financial institutions that hold the assets within an estate.

Typically, in accordance with the B.C. Probate Fee Act, agencies and financial institutions do not require probate for estates worth less than $25,000, but may require probate fees of:

• $6 for every $1,000 or part of $1,000 by which the value of the estate exceeds $25,000 but is not more than $50,000; and
• $14 for every $1,000 or part of $1,000 by which the value of the estate exceeds $50,000.

A well-thought out estate plan would take into consideration probate fees and move assets accordingly.

Trusts
Another key element of estate planning that is less discussed and less understood is trusts. A trust is a legal relationship between three parties:

1. The Settlor: The individual that establishes the trust and contributes certain property to it. The Settlor determines the trustee and the beneficiaries;

2. The Trustee: The individual that holds and administers the property or assets for the benefit of the beneficiary under the instructions provided by the Trust document; and

3. The Beneficiary: the individual(s) who benefit from the trust property.

With a trust, an individual transfers legal title of assets to a trustee for the benefit of a beneficiary. The trustee manages the assets on behalf of the beneficiary by following the instructions written in the trust document. Thus, when the individual dies, the trust distributes the remaining assets to the beneficiaries without having to pay probate fees. Where the estate assets are sizable, the potential savings of having a trust (approximately 1.4% of the gross value of the estate) can be significant.

Where to Start
Now that you understand the benefits of an estate plan, when creating your own, there are a few key elements you should consider. These include:

1. a will to specify the distribution of the assets after death;

2. Power of Attorney to authorize someone to act on your behalf if you become incapacitated;

3. Representation Agreement to authorize someone to act on your behalf if you become incapacitated and need help with making personal care or health care decisions; and

4. potentially creating trusts to mitigate tax consequences.

For more information on how we can assist with your estate plan, please contact estates@bellalliance.ca.