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How To Take Care of Our Assets When We Pass Away? | Estate Planning 101 | Estate Planning In Canada - YouTube
Channel: Thomas C Chan - Financial Services
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Have you ever wondered what happens to your
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assets when you get sick or pass away in canada?
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Or How long does it take to dispute
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money from a deceased person
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Or what do you need to do in order to control
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who gets what part of your estate?
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So in this video,
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I will go over the basics of Estate Planning
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in Canada so you don’t have to pay
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our governement 50% of your saving!
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Hey welcome back, this is Thomas!
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here to help Canadians to make better choices
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on Retirement, Wealth, and Insurance
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my goal is to make sure
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you can take 1 or 2 ideas home and
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start making smarter financial decisions today
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If you found values in this video,
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Consider subscribing!
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so you will never miss any of my videos.
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Let’s jump into it!
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First,
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let’s have a closer look at what estate planning is.
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Estate planning means passing one’s wealth
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from one generation to the next,
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no matter how small or big your wealth is,
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everyone with some assets should do this.
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Estate planning deals with the important question
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of what happens if someone passes away...
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who will get the assets?
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Does it go to the spouse,
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the children,
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some kind of charity?
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What part of the wealth will be
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own by the business?
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What will be kept as memories
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and what will be disposed of?
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And especially in canada,
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If we don’t think about estate planning
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while we are alive,
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then there is no clarity,
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and disputes will arise.
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And our governement will step in and could
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potentailly take 50% of your asset away.
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So indeed,
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thinking about our death and what happens after it
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isn’t a very comfortable topic.
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But think about it this way:
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we work hard all life,
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so we should be in control of what happens after.
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Plus,
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when we pass away,
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our family will already be in grief.
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Leaving all the estate planning to them
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will make things even harder for them.
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In many cases,
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it can even divide a family if things are unclear.
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So,
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take care of estate planing –
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even if you have only one property.
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If you need help,
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an estate planner can show you
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how to structure your estate planning.
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Now,
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keep in mind,
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I’m not a lawyer.
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Everything I share is for informational purposes.
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Talk to a lawyer to create a will
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or power of attorney.
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Estate planning is especially important for
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business owners or high-networth individuals
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It’s important because it gives everyone clear rules
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on what’s going to happen with your assets
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once you are gone.
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Plus,
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proper estate planning protects your family –
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I will get to that in a moment.
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And keep in mind,
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even if you own only one property
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or have smaller assets,
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estate planning is still important. If things go wrong,
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your assets could go back to the government...
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or become a financial burden to your family.
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Keep watching to find out
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how to avoid a negative outcome like that.
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Okay, so what exactly happens
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if someone passes away?
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When someone passes away,
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then they will enter the probate phase.
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Probating is a process where the state
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checks if the deceased’s will is valid.
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If you want to know more about
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what costs await you after your death,
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then check my video on this topic
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Anyway,
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in the probate phase,
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there are a lot of things to do.
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Debt has to be cleared,
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the assets have to be distributed, etc.
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and more importantly,
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you have to cut a cheque to the governement
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before you can claim the asset.
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If everything goes smoothly,
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this process usually takes 6-18 months.
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However, if lawsuits are going on,
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or any other issues occur,
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then probating can take up to 3-4 years.
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I talked about the fees and other costs
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involved in the death in my other video.
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But for clarity, let me state them again.
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The two biggest fees involved in canada are:
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The Probate fee
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This is very different from province to province,
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in B.C. for example,
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it’s 1.4% - this can add up to huge fees
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Taxes of the passed away person
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The thing is,
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if a Canadian citizen dies,
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everything that person owned will be treated
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as if this person sold all their belongings this year.
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This can cause a huge tax influx for the family!
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For example:
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real estates other than your principle residence.
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Your RRSP or RRIF accounts.
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Let say if you still have $500,000 in the
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RRSP/RRIF accounts and no spouse to roll over.
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Then the whole $500,000 will be consider your income.
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And therefore 50% will go to the cra
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That’s why estate planning is so important
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to reduce stress for the remaining family.
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Now that you know how important estate planning is,
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let’s look at what exactly you can do.
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What makes estate planning so complicated
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and daunting is that it’s different in each province.
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So everything I will talk about in
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the next section is only an overview.
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If you want more videos about estate planning,
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let me know in the comments.
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Anyway,
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here are the things for you to consider
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when planning for your estate in canada:
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Let’s start off with an easy one,
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Your online passwords.
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It’s a good idea to keep a record
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of all your passwords.
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You can either write them down somewhere secure
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or use programs like One Password.
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Just make sure they are stored somewhere so
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your family can access them after you passed away.
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Also,
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make sure to address what you want to happen to
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your social media accounts after you are gone.
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Should they be taken down or kept as a memory?
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Making decisions like this on their own
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can be stressful for your family,
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so reduce stress like this early
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by being open about it.
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Next we have tax documents
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and insurance statement.
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Keep important documents like this in one place,
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so your family can access them.
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You might also want to have a card with
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important phone numbers and contacts.
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Also don’t put these things in a bank vault because
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Your family cannot access to them
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unless there have clear instructions.
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Your will is a huge factor
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when it comes to estate planning.
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In my opinion,
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everyone in canada should have a will.
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But what exactly is it for?
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Well,
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it’s a document with instructions for your family to follow.
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When you create your will,
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make it clear to avoid any arguments.
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Also,
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be aware that you have to name your executor,
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the person who will gather the beneficiaries
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and distribute the assets.
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Usually people will name the beneficiary
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as the exectuor as well for cost purpose.
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the executor is a serious task,
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if they make mistakes
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other family members could sue them,
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so pick someone ready for the task.
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Inside the will,
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you should have funeral instructions,
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instructions on what happens to your assets,
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and even guardian choices
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for minors and disabled members.
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Btw,
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in case you are thinking that you can get by
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without creating a will,
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let me give you an example of why you want one:
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If you are based in Ontario,
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for example,
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and you don’t have any will,
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then only the first $200K of your assets
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go to your spouse,
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the rest is split within the family.
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This can be a serious issue if
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you have kids under the age of 18.
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In some cases,
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the family has to document
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all expenses of the kids moving forward,
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to get or keep the money.
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But even if your kids are over the age of 18,
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there are still risks.
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Your kids suddenly get a huge sum of money,
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and there is no control
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over what decisions they make.
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In many cases,
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they are wasting the opportunities.
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A proper,
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clear will helps everyone to avoid
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tricky situations like these.
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Also keep in mind that even with a will,
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there are laws that
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you can’t just leave people out.
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Talk to an estate professional in your province
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to find out why.
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While you definitely should have a will,
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it’s also not a magical tool that saves everything.
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Plus,
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after probation,
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it becomes a public document –
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so don’t leave unpleasant comments
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about family members.
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Another big part of estate planning is
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the power of attorney.
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This is very important in case you cannot
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make decisions due to sickness or other reasons.
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In such a case,
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the power of attorney allows you to
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pick someone to act in your name.
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There are options to make it temporary,
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when you out of the country,
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for example.
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Family members will be able to
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pay your bills for you,
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collect payouts,
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and make other basic financial decisions for you.
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There are also options so family members
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can make health care decisions for you.
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If you do that,
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definitely pick someone who
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deeply cares about you.
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Regularly,
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a Power of Attorney needs two witnesses
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to be legal and formal
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but some institutions have their own rules.
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Depending on your location,
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you might need two PoA,
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one for health matters and one for financials.
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It’s also a good idea to have a backup
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in case the first PoA passes away
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or can’t continue the role.
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Naming your beneficiaries makes it
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possible to bypass probate fees,
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so it’s a clever idea.
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For example,
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when you open a rrsp or tfsa account in the banks,
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in most of the time,
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they will not let you assign a beneificary
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so be aware of that.
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When you pass away,
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most likely your family has to pay final expenes,
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probate fees,
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and the capital gain tax for you
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before they can inherit your asset.
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But if they can’t access your estate
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it will be hard to pay off.
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A delay can cause more fees with the CRA…
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This is where life insurance comes into play.
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Insurance money gets paid out right away tax free,
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this can help your family to pay fees immediately.
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Also because life insurance has privacy protection,
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so therefore it will go straight into the hands of
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beneficiaries without any interference or delay
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Another component of estate planning are trusts.
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This is a complicated topic but it can be
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very effective for big corporations,
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real estate investors,
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or people with a huge portfolio.
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It provides a tax-saving advantage,
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estate freezes,
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and can even be used as a retirement income stream
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for yourself while younger family members work corporate.
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As you can see,
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estate planning is a topic that goes deep.
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This is just the tip of the iceberg!
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if you like me to further in details
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or if you have any questions,
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Let me know in the comment below!
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And I hope you get 1 or 2 ideas out of it!
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Remember,
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the earlier you plan, the less you have to pay!
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This is Thomas,
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