When my great-uncle Kerry died, there was some confusion when his last will and testament was read. He had managed to divide his estate into 10 parts, leaving two parts to a friend, two parts to another, and five parts to family – making just nine parts. We all had a chuckle, because he was a mathematician by profession.
Uncle Kerry did, however, do a great job at documenting his entire plan, as did my grandfather. My grandfather’s will was just one part of his documented plan. In his will, he did write: “I wish peace and affluence to all of my loved ones, and a piece of effluence to all of my enemies.”
Last week, I introduced the five “Ds” of estate planning: Define, design, document, discuss and distribute. I had focused on the first two of these elements of a good estate plan. Today, I want to talk about documenting your plan.
Documenting your estate plan is important for a few reasons. First, it will help to ensure that you’re clear on what should happen when you’re gone. Second, it will vastly improve the likelihood that your wishes are actually carried out. Third, without certain documentation, it’s possible that the government could step in and dictate what should happen upon your death. Finally, documentation is largely about making life much easier for your executor and heirs. If you’re like most people, you likely have personal and financial information in several different places. Who’s going to pull all of that together after you’re gone?
So, what type of documentation should you prepare and maintain? I’m going to put these documents into three buckets: (1) your last will and testament, (2) your powers of attorney, and (3) other information.
As for your will, my first piece of advice – as crazy as it might seem – is to have one. I’ve met many very successful individuals who don’t have a will. Without a will, the intestacy laws of your province will determine who gets what. This typically results in much higher costs to administer your estate, and more in taxes on death than necessary. Next, be sure to visit a lawyer specializing in estate law to help in preparing your will. My article from last week should help in drafting your will if you’ve answered the numerous questions I posed. I’ve written in the past in more detail on wills (see my articles dated Jul. 24, 2013 and Aug. 9, 2012, for example).
Your powers of attorney may look different, and go by different names, depending on your province. Still, these documents should provide another person with the ability to make decisions over your financial affairs and personal care in the event you’re unable to do so. These documents are effective while you’re still alive but can’t look after yourself (once you’ve died, your will becomes the key document governing your affairs). Again, look for an experienced lawyer to assist in preparing these documents.
Now, what about the “other information” I mentioned? I suggest that you document the following information and update it once a year, or as needed:
Personal information: This includes your legal name, current address, place of birth, citizenship, social insurance number, occupation, all e-mail addresses, phone numbers, and similar information.
Family and dependants: List the legal names, addresses, dates of birth, citizenship and contact information for each of your immediate family members, including your spouse, and dependants.
Professional and health care advisers: Document the names, addresses, and occupations of each of your professional advisers, including your doctors and dentist.
Assets and liabilities: List all your assets, including bank, investment, RRSP, RRIF, TFSA, pension plan or similar accounts (include account numbers, financial institution names, and beneficiaries already named on any plan documents). List your real estate (locations, location of deeds, and market values), and all other assets (locations and market values). Don’t forget to include business information if you own a business. As for liabilities, include the name of the lender, account numbers, and the amounts owing (think of credit cards, lines of credit, mortgages, promissory notes, student loans, unpaid taxes, and other debts).
Insurance: List all of your life and property insurance policies (include the insurance company, policy numbers, your advisers’ names, and the amount of any cash values or death benefits).
Gifts made: Track gifts already given if those gifts are to be an advance on an heir’s inheritance (some gifts are made over and above what the inheritance upon death will be; some are advances).
Tim Cestnick is president of WaterStreet Family Offices and the author of several tax and personal finance books.