Despite the critical importance of estate planning, many Canadians are unfamiliar with the components of a comprehensive estate plan, causing them to be unprepared for the future. Only one-third of Canadians have an estate plan in place and just 46 per cent have general knowledge about them, according to IG Wealth Management’s (IG) 2024 estate planning survey.
According to Statistics Canada, 19 per cent of Canadians are 65 years and older. With our aging population on the rise, estate planning matters now more than ever. Yet, there is a significant knowledge gap when it comes to understanding the key components of an estate plan. Only half of respondents said that they are aware of how a power of attorney works and just 47 per cent understand the role that a will plays in estate planning. For all Canadians, a proper plan will ensure that their assets are distributed as they wish and will maximize the value that their loved ones can receive from their estate when they pass.
What is estate planning?
Estate planning is a broad term that can apply to many different actions, including drafting a will, naming beneficiaries, purchasing life insurance, deciding on funeral arrangements and more.
But many Canadians lack this general knowledge. This is likely due, in part, to the fact that most people avoid planning for their own passing. That said, the importance of having the right strategies in place cannot be understated.
“It’s concerning that a majority of Canadians are unfamiliar with estate plans, their key components and the importance of having a plan,” explained Christine Van Cauwenberghe, Head of Financial Planning at IG. “For example, having a proper life insurance policy as part of your estate plan can pay for funeral costs, provide financial security for loved ones, and help offset probate fees. Additionally, letting your family know of your wishes if your health declines could ease the burden on them later.”
Having a will in place
The first step in estate planning is creating a will. This document states how your assets should be distributed when you pass and designates the person or people who will carry out your wishes.
A few different parties and terms are involved, so you’ll want to have a basic understanding of the process before completing your will.
Power of attorney: This legal document you sign gives another person the authority to manage your money or health if you cannot make those decisions on your own.
Executor: This individual distributes the estate based on the wishes outlined in the will.
Beneficiaries: Named in the will, these people, will inherit property or assets.
Joint tenancy with rights of survivorship: A legal structure where if one tenant dies, the interest in the property passes to the partner without probate due to the right of survivorship.
Probate: This is the process where a will is validated. Once confirmed, the executor can carry out the wishes and pay any fees associated with the estate.
Generally, you should write or update your will when you experience major life events such as having a child, getting married and acquiring new property. The earlier you start thinking about estate planning - and take action - the better.
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Working with a financial advisor
Some people who create their estate plan on their own often do so with good intentions. However, if they aren’t familiar with the legal nuances and processes, it could lead to complications and problems for themselves or their beneficiaries.
“When it comes to estate planning, it’s best to work with an advisor who understands your needs, can work with others such as your lawyer and accountant and create an estate plan that protects your assets and fits well with your integrated financial plan,” concluded Ms. Van Cauwenberghe.
An IG Wealth Management financial advisor can work with you to evaluate your finances, provide practical advice to reduce your tax burden, find a suitable life insurance policy and ensure your will is comprehensive. Plus, they can be valuable resources for additional estate planning information and support. This open discussion can help you manage your finances, maximize the value of your estate for your beneficiaries and provide peace of mind to you and your loved ones.
