Preparing for the day - Easing the burden for your loved ones

When it comes to topics that no one wishes to discuss, your own death or the death of your spouse almost certainly tops the list. The notion of living without a loved one is so overwhelming to some people that they simply avoid the subject altogether. And while this attitude is hardly surprising, the implications of putting one's head in the sand when it comes to finances can lead to circumstances that no one would wish for.

So think for a moment about your loved ones. What gamut of emotions would they be going through if you should pass on? Will they be able to pull themselves together and face all the decisions about your funeral arrangements? Would they know where to find the contact information for your pension plan? Your insurance policy? Your RRSP or annuity contract information?

Considering their feelings first may make it easier for you to plan ahead for the day when you become incapacitated and can no longer act upon or communicate your plans for your estate.

GETTING STARTED
To help ease the burden on your loved ones, there are a number of steps your can take to put your financial affairs in order. Whether you consider yourself to be a person of simple means or a captain of industry, the first step involves preparing a detailed document that lists your assets, liabilities and administrative information, and storing this list in a centralized place.

Although this process may be time- consuming, a comprehensive list will be an important tool for your loved ones. Imagine how difficult it would be for your family to track down a lifetime's worth of your personal information if you didn't provide it for them in advance.

For starters, make sure you provide the following information in your list and ensure that it is updated once per year:

• Bank accounts and the name(s) of the employees at the bank with whom you do business
• Insurance policies by company and policy number
• RRIF and RRSP account numbers, and the names of the institutions in which they are held
• Information about your pension plan
• A copy of your will and the name of your lawyer and law firm where additional copies can be obtained
• Personal documents such as birth certificates, marriage certificates, social insurance number card, etc.
• Real estate deeds
• Location and number of safety deposit box, including a copy of the key
• Details of any funeral arrangements you have made
• Names and contact numbers of the executor(s), trustees and any beneficiaries named in your will
• Name and phone number of professional advisors
• List of financial liabilities

WHERE THERE'S A WILL, THERE'S A WAY
If you have yet to prepare a will or haven't kept your will up to date, this is an important place to start. The will is a roadmap for planning your estate and should be updated on an ongoing basis – particularly as your circumstances change throughout your life. A will is quick and easy to produce and generally covers the following:

• The distribution of assets within the estate (e.g. investments, real estate, possessions)
• Naming beneficiaries of the estate (e.g. immediate or extended family, institutions, etc.)
• Naming the executor – the individual(s) or organization chosen to administer the estate
• Naming the guardian of any minor children and trustee(s) for property

If you should die without a will (referred to as "dying intestate"), the court may appoint someone to administer and distribute your estate according to the predetermined rules of the province you reside in. In this case, not only have you forfeited your say on how things are divided and who will be in charge of the process, it could also take months before these issues are resolved on your behalf.

And be aware that, without a will, access to your bank accounts, safety deposit box and other important financial accounts held exclusively in your name will be frozen to members of your family until a court appointed administrator is selected, or until such time that your heirs have agreed to appoint one. This can create delays and financial obstacles for your family during a time of considerable need.

NAMING AN EXECUTOR
Aside from naming the beneficiaries of your estate, a will establishes who you have empowered to handle your affairs after you are gone. When drafting your will, it is very important to make this decision carefully. The role of executor is a complex one, and the person you choose will face numerous, time- consuming responsibilities, not to mention the stress of mitigating potential family strife. Qualities to look for include a person who is comfortable handling both legal and financial affairs, a person who can be impartial and who is capable of making tough yet fair decisions when acting on your behalf.

STRATEGIES FOR SIMPLIFYING YOUR ESTATE
Consolidate your investments

There are a number of steps you can take that will ease the burden on your loved ones. Perhaps the easiest and most effective of all is to consolidate your investments in one place.

In terms of investments, many Canadians maintain a number of RRSP and RRIF investments at different financial institutions. And while this might have seemed prudent in the past, it can create a number of headaches for the person you select to administer your estate.

For example, to gain access to your investments, your executor is required to provide the appropriate documentation – a death certificate, and a copy of your will – to each institution before they can act. In addition, each financial institution will likely have different administrative procedures that your executor will be required to negotiate. If you consolidate your investments with one institution, this will not only cut down on the amount of documentation that your executor is required to file, it will also cut down on the amount of leg work as well.

There are additional benefits to consolidating your investments with one advisor. The most notable would be that your advisor will have a complete picture of your financial situation and will be better informed to make recommendations that can ease the estate administration process. For example, your advisor can easily ensure that the proper beneficiary designations are made for your RRSPs, RRIFs and insurance policies to ensure assets pass quickly to your loved ones. In addition, your advisor can set up a joint investment account to ensure your spouse has access to adequate funds in case you unexpectedly become incapacitated.

Be aware that in the province of Quebec, assets held jointly with another person do not automatically transfer to the co-owner. The undivided portion of the deceased co-owner's assets will be bequeathed in accordance with the provisions of the will, a contingent owner appointment, or the intestate rules. Therefore, it is important to ensure that your spouse has sufficient resources at their disposal at all times in case you suddenly become incapacitated.

DON'T FORGET ABOUT TAX
The good news here is that when it comes to taxation the surviving spouse has little to worry about as your assets will transfer to them tax-free (assuming the will or beneficiary designation was made in favour of such spouse). Assets that qualify for this include investments held within your RRSP and RRIF, company pension plans, government pension plans, your family home, non-registered investments and the proceeds of a life insurance policy. The only paperwork that is required to facilitate the transfer of these assets is a copy of a death certificate and a will. In Quebec, a copy of the will is often required since it could include a new beneficiary designation.

One thing you will have to consider however, is that upon death, the deceased partner's final tax return is due six months after the death, or by April 30th in the year after death, whichever comes last. Your final tax return is usually handled by your executor, so be sure to organize your files in a manner that will help assist your executor in this process.

If your spouse is uncomfortable with financial matters, there are some additional steps you may want to consider to help them plan for their own estate. Upon the death of the second spouse, the transfer of assets to the second generation (i.e. children, grandchildren or anyone else named in your spouse's will) triggers a significant taxable event. If this is a concern for you, ask your advisor how you can minimize the amount of tax and fees their estate will pay after their death.

STRATEGIES FOR BYPASSING PROBATE
Your advisor can help ease the estate planning process in other areas as well. For example, if you plan on bequeathing assets to persons other than your spouse in your will, your advisor can help you by recommending you invest at least a portion of your assets in investments that are capable of bypassing probate (not applicable in Quebec).

Bypassing probate is desirable for a number of reasons. Firstly, when assets bypass probate, they can be distributed much faster to the people you have named as beneficiaries. Secondly, bypassing probate can save a considerable amount money. Depending upon the province in which you reside, the fees paid for probate are typically based on the market value of the assets being distributed to your beneficiaries. These fees can be considerable so it only makes sense to seek ways to minimize the impact of these fees.

The proceeds of life insurance contracts are perhaps the most well-known examples of assets that bypass probate, but other types of insurance-related assets qualify as well. For example, investing in segregated funds, or GICs (guaranteed interest contracts) issued by an insurance company will allow you to name a beneficiary in the contract. In these cases, generally the only documentation that will be required to distribute the proceeds of these investments is a death certificate.

There are no probate fees or estate duties of any kind in Quebec. Therefore, the beneficiary designation can be used for other reasons.

ESTATE SIMPLIFICATION CHECKLIST

• Ensure your personal information (bank account numbers, investment contract numbers, insurance policy numbers, tax information, etc.) are up-to-date and stored in one centralized place
• Contact your advisor to obtain the name of an estate lawyer to draft a will, or update a will to reflect your current intentions
• Select an executor for your estate
• Consolidate your investments and bank accounts to simplify administration
• Ensure that all beneficiary designations complement those outlined within your will
• Provide a copy of your marriage contract
• Open joint bank and investment accounts to ensure resources are readily available
• Discuss investments and strategies that allow your estate to bypass probate
• Consider ways to minimize the tax bill for the next generation
• Look into a preplanned funeral arrangement
• Discuss what you have planned with your spouse and/or children

OTHER CONSIDERATIONS
Ensuring that your finances are well organized is a big step towards easing the stress on your family after you're gone. One additional step you may wish to consider is planning your own funeral well in advance.

The process will be an onerous one for most people, but keep in mind that planning your own funeral actually makes a lot of sense. The time period immediately following a death is a whirlwind of emotions and newfound responsibility for your family. Any preplanning on your part that clarifies your wishes will be a welcome addition during this time.

In addition to reducing stress, preplanning a funeral may also save your family money. In general, once you've chosen what you want and have paid for it in full, the funeral home becomes responsible for any price increase over the period during which the prearranged contract is in effect, regardless of how steeply prices may increase during that time. For example, suppose you prearrange and fully prepay for a $5,000 funeral for yourself in 2005, but you live until 2030. Factoring in a modest inflation of 2 per cent per year, you will have saved your family over $2,500. That's because you paid for your 2030 funeral in 2005 dollars.

If you are like most people, however, the real attraction of preplanning a funeral is easing the burden on your loved ones while having more control over how it turns out. By making your preferences known in advance, you may also be helping your family avoid potential disagreements when interpreting your preferences after you're gone.

YOUR ADVISOR IS THERE TO HELP
When it comes to preparing for the day, there is a lot to think about when trying to simplify things for your loved ones. And while there is no avoiding the melancholy nature of the subject, there is lot you can do to help ease the stress of your loved ones after you're gone. If you are having trouble knowing where to start, consider contacting your advisor to discuss your situation and find out what can be done now.

Beyond helping you simplify your estate from a financial perspective, many advisors develop networks with other professionals who can help you get your affairs in order. For example, your advisor may have the names of a few trustworthy lawyers who can help you draft or update your will to ensure it reflects your current intentions. In addition, a lawyer with estate planning expertise can help you select an individual best suited for the role of executor to administer your estate.

Once your will is updated, your advisor can help consolidate your investments while ensuring there are resources available for your loved ones in case you suddenly become incapacitated. Beyond that, your advisor can also ensure that the beneficiary designations on your investments complement those outlined within your will. Once these issues are taken care of, be sure to inquire about estate planning strategies that not only simplify the transfer of your estate, but also ensure that your loved ones are not unduly affected by large tax bills, probate fees (not applicable in Quebec) and other fees associated with the transfer of an estate.

WHAT IS PROBATE, ANYWAY?
Probate is the process whereby the court recognizes the authority of an estate trustee that you have named in your will. One of the reasons for probate is to provide needed assurance to certain third parties like banks and other financial institutions that your will is valid and that your executor is authorized to act in your name with regard to your assets after your death.

The process is different in the province of Quebec. If a will is a notarial will, it will not require verification, which will help your heirs avoid costly delays and fees. If a will is a holograph will, or a will made in the presence of witnesses, it will have to be verified by the Superior Court. If a will is in the notarial form, a simple death certificate and a will search at La Chambre des notaires du Québec and Le Barreau du Québec will normally be sufficient to begin the estate settlement process.

Once a will has been probated (or verified), your executor can facilitate an efficient distribution of estate assets in accordance with your wishes outlined within your will. Depending upon the province in which you reside, probate can take anywhere between six to nine weeks, and fees based upon the percentage of your estate's value will apply.

In Quebec, there are no probate fees and the expense to verify a non-notarial will is mainly made up of legal fees. The court fees that apply will be minimal.

WHERE TO GO FOR ADDITIONAL HELP
If you would like to learn about additional ways to simplify your estate, or would like to help your loved ones prepare for the day, there are a wide variety of books available on financial planning in Canada that relate to educating the surviving spouse. One of the following resources may help:

FOR YOU:

• Seniors Canada On-line – the Government of Canada's website for senior citizens, with province specific financial planning information

http://www.seniors.gc.ca/

• For residents of Quebec, the following sites will be of interest to you:

http://www.barreau.qc.ca/boutique
http://www.cdnq.org/fr/infosJuridiques/testamentPourquoi

FOR YOUR SPOUSE:

• Surviving the Death of Your Spouse: A Step-By-Step Workbook, by Deborah S. Levinson
• Making the Money Last: Financial Clarity for the Surviving Spouse, by Jarrett G. Bennett