Advisor Team



Financial Advisor


    Everything You Need To Know About Will and Estate Planning in Canada

    What is Estate Planning?

    Financial planning is literally something that needs to be done with a great care, and your estate is no different. A lot of people are under the impression that estate planning can wait. Before we dive head first into the technical aspects of estate planning, we need to understand the importance of estate planning and how it all works. If you're a bit confused on the basics of preserving wealth by creating a will, or unsure of what a trust is, then this article will definitely be a good start for you.


    Importance of Estate Planning

    Let's get started by getting rid of the misconception that life insurance is enough to plan out your estate. While life insurance is an essential piece of any good financial plan, it should never make up your entire plan. You will definitely end up leaving money behind for your beneficiaries, but you might not actually have everything set the way you intended.


    While the correct and accurate risk management, accumulation, and distribution are the important pieces of your overall financial plan, you'll find that your estate is crucial, because it is actually your life's legacy. Everyone should be in control of their own legacy; so, let's take a look at the details of estate planning.


    How Estate Planning Works?

    Estate planning is when you make decisions in regard to the funds that you'll be leaving behind after you pass away. While this sounds frightening, it is a grim reality that most of us need to come to details with. Some of the key aspects include, but are not limited to:

    • Creating trusts.
    • Planning your will.
    • Planning out estate tax to shield the money you pass down.
    • Managing life insurance.
    • Working with an attorney, who understands your needs, while consulting with a financial advisor, to make sure the rest is up to your standards.
    • Making sure that your word is law after you pass away, and assigning things like your home to the beneficiaries and even trusts.
    • Planning your funeral arrangements.

    Will and estate planning, to put them simply, are the methods to ensure that your wealth is properly taken care of after you pass away. Estate planning also applies to your assets, your final wishes, and any business ties, you may have left behind. For the purpose of this article, we will cover everything you need to know about how to plan your estate properly.


    Who Needs Estate Planning?

    Before we get the complicated aspects of estate planning, it is important that you understand exactly when and why you need estate planning. Most people believe that this is something that doesn't need to be handled until you're approaching the end of your life. However, this is actually a misconception. Just like life insurance, you should begin planning for your estate, when you have debt that is attached to a consigned loan (like a student debt) or a mortgage.


    When is the Best Time to Plan Your Estate?

    • While the scenario is not exactly realistic to everyone, you will find it a great opportunity to start your estate planning, when you first have children.
    • This is also true for a recent home purchase, because you want to make sure your spouse is not left with a massive amount of debt, if there are any complication on your end.
    • A good rule of thumb to follow is that once you hit your 30's, it is definitely time to plan out your estate.


    How to Plan Your Estate?

    Many people are unsure about how to accurately plan their estate and this is actually one of the major deterrents of estate planning. Luckily, if you start in your 30's, the process is not difficult. This is due to the fact that you won't have too many assets to worry about; so, major tax strategies are not exactly in the play yet.


    Setting it and forgetting it may sound like a fairly good and easy idea, but you should avoid this at all costs, when it comes to planning your will and estate. As you get older, you'll notice that things will start to change in your life. These changes can lead to good or bad things, but at the end of the day, you should be making adjustments to your will and estate planning strategy, whenever a major life change happens.


    If you're unsure of when to make changes to your will, here are some good times to update your will. Whenever you:

    • have a new child.
    • start a business.
    • accumulate serious assets.
    • inherit money.
    • take out a life insurance policy.
    • establish a trust.
    • pay off your house completely.
    • sell your home.
    • get divorced.
    • have a child, who passed away.
    • have a sibling, who passed away.
    • have parents, who passed away.
    • become sick with a terminal illness.

    You'll start to notice that there are lots of times, when a change to your will should be made. This is important to keep up with, because you don't want any issue to emerge, while your will is not updated.


    How a Will Works?

    Now that you know when to start planning your estate, and that you'll need a will, let's take a look at the purpose of a will.


    A will is both simple and complex at the same time, but the words on the pages definitely hold the power, depending on the legality of them. Have you ever wondered how a will works? Or how it is written? Believe it or not, a lot of people believe that you can just simply write some important things down on a piece of paper, while it will unlikely hold up in a court of law.


    When you pass way, quite a few things start to go into motion. Someone, appointed by you, will begin to take the necessary steps to ensure the will works the way you requested. If this is not backed by the law, the family members could end up having a feeding frenzy over your estate. A will is drafted up by an estate attorney, but it is really just someone writing down your final wishes. The only reason the attorney is important is due to the fact that they will make sure the proper language is incorporated into the will, based on the law.


    Wills are pretty simple, when you don't have a lot of assets. You allocate a few things to a few people, and your estate is distributed fairly and easily. You don't have to worry about any major issues, pertaining to trusts or assets. Plus, if you have young children, a will can determine who takes care of them. If you leave them behind without a will, you forfeit the right to choose their next guardian.


    How a Trust Works?

    We have thrown the word trust around quite a bit so far. If you are still unsure of what a trust is, or how it works, you are about to have all your questions answered. The one thing, you should definitely understand, is that trusts are important, because they can move a family's money around, with low tax implication.


    The Key Purpose of A Trust in Will and Estate Planning

    A trust is a financial vehicle, which becomes its own taxpayer. Although in Canada, unlike the United States, a trust does not become its own entity, it can still certainly act like one. There is one issue with this method of establishing a trust, and it can be a pain, if not handled correctly. As a matter of fact, in the United States, a trust is its own entity, and that's how it can be shielded from tax. Unfortunately, in Canada, a trust is assigned the highest possible tax bracket, as an attempt to stop this practice.


    If this still doesn't make much sense, think of a trust as a way to move assets to your beneficiaries. This is done by utilizing an estate attorney, and you'll end up relinquishing your assets to the trust (or a portion of your estate). To put this simply, you're essentially transferring your estate to another person. Keep in mind, it is possible to transfer your entire estate into a trust. This practice is commonly referred to as freezing your estate. There is another reason that a trust may prove useful in the domain of estate planning. If you want to make sure that irresponsible family members don't have access to your estate, you can appoint your own trustee. This trustee will act as the new manager of your previous estate, and will divvy the funds in your best interest.


    A trustee is generally someone you can trust with your life (literally), and sometimes, estate lawyers can even be appointed to the position. This method also works for a living trust, because you might not be of sound mind. If this is the case, your trustee will handle all trust and estate needs.


    How Trusts Differ from One Another in Canada?

    If you want to know how to plan your estate, you'll need to know which trust is right for you. In Canada, there are two different primary types of trusts:

    • A trust for the living is called an Inter-Vivos Trust.
    • A trust that comes into play, when you pass away, is called a Testamentary Trust. The Testamentary Trust is usually brought to life through a will; so, if this is the solution you need, you'll need to combine both will and estate planning.

    Luckily, trusts are inexpensive to create, and with the help of an estate attorney, you might be surprised at just how easy the process is.


    The Living Trust

    You'll be able to do more for less with an Inter-Vivos Trust. Plus, once you're 65, you can begin making contributions to up to 3 different trusts of your choice. This makes a trust a great way to pass down generational wealth, but also a great way to shield your estate from too much tax exposure.


    You should also understand arbitration laws. These laws allow minors to reside in the home without any penalties, whereas a spouse could find themselves in quite a bit of trouble, if your money is not well taken care of. So, when you go setup a trust, make sure you get some advice on how to properly plan your estate, in order to avoid tax exposure and unexpected losses.


    The Business Trust

    Canada also has trusts, designed for businesses. These trusts are designed to preserve the value of a business, once the owner has passed away. This can work for both small and large businesses, and allow the surviving family members to hold off on selling it. This trust is a bit more complicated than the other options, as running a business is more complex. A business trust is put in place to preserve the wealth of a company. This has a lot to do with shares, and the estate freeze method can lock-in the company at its current market value. This will allow the stock to grow, and the people who have access to the trust, can withdraw the dividends, earned by profitable investments.


    The Difference Between a Will, a Trust, and an Estate

    We just threw quite a bit of information at you, so it's okay to be a bit lost. Luckily, there is an easy way to remember the difference between these three estate planning techniques. Look at it in this way:

    • A trust is a transfer of ownership.
    • A will is your legal word.
    • An estate is made up of the assets you intend to leave behind.


    While will and estate planning might seem complicated, you can find all of the help you need from a qualified attorney or advisor. Plus, in many cases, advisors and estate attorneys work together to plan a client’s estate. All three of these categories should be addressed, when you meet with an attorney. This way, you will make sure to acquire the right estate plan.


    Importance of an Estate Planning Attorney

    We mention estate planning attorneys quite often, as they specialize in contracting the legal work, essential to planning the strategies. When it comes to will and estate planning, you should definitely seek out a qualified attorney to help you draft up a perfect plan. Some duties of an estate attorney are as follows:

    • Providing the general will and estate-planning strategies.
    • Having the ability to become a trustee.
    • Possessing the power to draft up a legal will.
    • Having the knowledge to help clients create a trust.
    • Assisting clients with any other legal documentations.
    • Resolving family disputes to protect clients’ interests.
    • Devising estate-related tax strategies.


    A qualified attorney can make recommendations about your estate, but an estate attorney works best, when paired with a competent financial advisor and insurance specialist. Estate and will planning is definitely a team effort.



    Will and estate planning is certainly a simple and complicated task at the same time. While we might think we can do it on our own, we'll need a strong team behind. Drafting legal documents, establishing trusts, and drafting a will, is not a simple process. Regardless of your age, if you haven't already done that, you should definitely start looking into will and estate planning. Whereas it is wise to start young, but it will be never too late to start writing your will.


    While an estate attorney is more than qualified to handle all of your estate needs, estate planning is a crucial part of your financial plan. Like any piece of a financial plan, you cannot just focus on one area. You need to make sure that your risk is managed, your assets are accumulating wealth, and you have lines of distribution in place. Without a solid foundation to begin with, your estate plan may collapse, no matter how bulletproof it may seem. Therefore, since an estate attorney is only one piece of the puzzle, you will need a financial advisor to help you with the rest.


    In order to start drafting your will, or creating a trust, you can set up a consultation with one of our advisors at ABC Financial Advisor to clear up any gap in your current plan and cooperate with an estate attorney to make sure your wealth is being managed properly. Estate planning in Canada can be quite easy, as long as it's done properly. We wish you all the best in the rest of the process.


  • (no comments)

Post Comments