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Real Estate Considerations: Your Estate

Afterlife: Protecting Your Estate.

Happy New Year to my loyal reader(s?)!

Making New Year’s resolution is a commonality among most people, and it usually starts at the onset of the year. We look forward to a great year, and so, the very act of this kind of foresight usually means setting goals and planning ahead.  There’s no better way to start your year than to plan on how you are going to protect your estate.  Right.. not really.  But if you’re still reading, means you’re at least a touch interested in how this works.

There’s a saying from somewhere.. The evil that men do lives after you.  There must be once in your life where you might’ve thought, “What will happen to my possessions after I die?”.  We all hope to protect our estate from any claims people bring against us after our passing.  In the same light, I would ask, what would you do to best manage your estate after death?

Planning Ahead

  1. Writing a will.  The absence of a will means your major beneficiaries could possibility be the provincial and federal government tax departments.  Potentially, other beneficiaries are determined by a provincial government formula for family members, which may not properly reflect your wishes in any way.  To start, you’ll need two documents during your lifetime.  One is an enduring power of attorney that gives the legal right to one or more designated persons to manage your financial and legal executions if you are incapable of making your own decisions or lack the mental ability to do so (e.g. when you suffer from a recent head injury).  The second document is a living will or representation agreement or health care proxy.  Different provinces will ascribed different names, but serves the same function.  This document essentially designate your wishes for health care needs, possibly assigns a person to act on your behalf, and set out your wishes if you suffer from a life threatening condition.  (Edit Mar 24, 2017: Living wills may no longer be binding.  Talk to your lawyer about the ramifications of a recent change.)
  2. Having a shareholder’s agreement with a buy-sell clause.  This allows you to buy out the other’s interested in certain situations, in the way it’s been set out in the terms of the agreement, while the individual is alive or from her estate.  This applies when you own a business with other partners.  This is critically important because if you don’t have it, there is no formula that exists to resolve issues that might be anticipated, leading to legal issues that would need to be resolved in litigation.  A not-so-good case scenario is to hire a lawyer which involves money, delay, and frustration.
  3. Designate beneficiaries.  Take, for example, insurance policies, RRSPs, RRIFs, and some non-registered investments.  These investment products allow the proceeds to bypass your will and hence your estate.  The advantage?  Creditors can claim only from assets in your estate, and the funds aforementioned are out of reach.  Also, designating beneficiaries allow you to save on provincial probate tax.  Any insurance proceeds are tax-free to the recipient.  However, if the proceeds go to your estate first before reaching the intended recipient, those funds would be included in the probate fees.
  4. Create a trust.  Setting up a living trust while you are alive enables the content of the trust to bypass your will, and in turn, your estate.  A testamentary trust, setup via your will, takes effect on your death.  These trusts can remove assets from your estate and away from creditors.   If you set up a trust before you die, a living trust, it bypasses your will completely and therefore is not covered by probate tax.   However, if you setup a trust by way of your will, you create a level of risk.  If your will is challenged by some third party who wants the judge to vary the will in their favour, your trust may be subject to review.

As always, trust your lawyer.  I am the realtor who understands the intricacies and need for all parties in a real estate transaction to bring comfort and clarify in your investment decisions.  Suggestions and definitions here may change over time, so don’t rely on the content as much as the reasoning behind why you should take these steps to protect your estate.

Hope this post has been helpful to some degree.

Always feel free to contact me if you have real estate related inquiries.