The thought of preparing for the end of your life may feel a little morbid or unnecessary – especially if you’re at the midpoint of your life and focused on getting the kids to school and securing a promotion. It’s understandable if your financial focus is preparing for college funds or saving for renovations. However, your financial fitness also depends heavily on estate planning.
Being prepared means not just ensuring that you have rainy day funds set aside but ensuring that you’re not inadvertently leaving your family and loved ones with a financial burden after you’re no longer here. Keep reading for some key considerations when planning your estate and preparing your executor.
What is an executor and how do I choose one?
The executor of an estate is the person who is responsible for winding up your financial affairs after you pass. They’re the one who closes your bank accounts, ensures any remaining debts are paid off, and sells or transfers any property so that your assets are shared among your beneficiaries. The executor is the person who takes care of all the financial loose ends so that the burden of these details doesn’t fall to someone unprepared to complete these tasks during a time when they’re also grieving and dealing with loss.
Choosing who to ask to be your executor can be difficult. Ellen Murray, Senior Financial Planner at Westoba Financial Solutions, notes that your executor should be “someone that you trust implicitly, and who is responsible – someone you know will complete the job.” This should be the person who understands what is being asked of them and will be in a position to take on the role when you go. “It’s also helpful if they have some financial savvy as well,” Ellen says. Your executor can be a family member, friend, or financial representative. If they are your friend or family member, keep in mind that they will be grieving your loss, so ensure they are comfortable with taking on this role.
Where do I begin?
While estate planning involves more than simply having a will in place, a will is a good place to start. First, find a lawyer that you trust and have them prepare a will for you. Your will is the legally binding document that outlines where you’d like your assets to go when you pass and how your liabilities will be dealt with.
You’re not legally required to prepare a will; however, if you choose not to, the laws governing the province or territory you live in will make the call on how your assets are divided. So, it’s best if you take the initiative and ensure that your wishes are met when you’re no longer here. As Ellen Murray notes, having a will prepared by a lawyer is “not expensive and is worth every dime to make sure that your estate is distributed the way you want it to be by your executor.”
You can find a lawyer by searching your provincial or territorial law society here.
It’s also important to think of your will as a “living document” (mind the pun) – that means you need to review and update your will on a regular basis to reflect the changes in your assets, liabilities, and wishes.
Where does my debt go when I go?
If you have remaining debt when you pass, it thankfully does not get passed on to your spouse, children, or other family members. Instead, it stays with your estate. This means that the assets you have – savings, property, investments – must be used to pay off that debt before anything is passed on to your beneficiaries. Joint debt, however, transfers to your co-signer. A final tax return must be completed and submitted by your executor after you pass, and those taxes must also be paid by the estate.
If you have an outstanding mortgage when you pass, that mortgage stays with your house. So, if you’ve transferred ownership of your house to a spouse, for example, the mortgage is transferred to them as well. If you haven’t named anyone as the beneficiary of your home, then your estate must pay the remainder of the mortgage. The executor would then manage the potential selling of your home in order to pay off the mortgage if need be. This is when having mortgage insurance can be helpful. You can read more about it here.
Other debts like credit card debt or loan debt must also be paid by your estate when you pass. This can reduce the inheritances paid to your beneficiaries, so it’s important that you keep on top of your debts while you’re still here. If you need guidance, our Financial Planning team is here to help you manage your financial fitness and unburden you from debt.
What does my executor need to know?
So, you’ve had your will prepared and chosen your executor. Now what? There are a few key things that your executor needs to know up front:
Where are your will and other important documents?
Be sure that your executor knows exactly where to find your will, deeds, insurance documents, and other important information when they’re needed most. Keep them in a safe spot in your home, in a safety deposit box, or even with the executor themself. Your executor should also know the names and contact information of your lawyer, accountant, and other relevant professionals.
What possessions do you have?
Make a list of all of your possessions – not just those assets named in your will, but sentimental or other items that, while they don’t have a high financial value, are important to be passed on to your loved ones, nonetheless. Be clear about who you want your personal items to be left to when you pass. “When creating your will, be careful about how you mention your investment (RRSP, TFSA, GIC, etc.) beneficiaries,” explains Ellen. “You do don’t want to include a beneficiary for your investments on your will, because you may have mentioned them on the contract.” Reach out to your Financial Advisor for more information about your investment beneficiaries.
How can your online presence be accessed?
When we pass, many of us will leave behind a digital presence – social media accounts, e-commerce accounts, and digital financial accounts. Be sure your executor has access to those accounts so they can be deactivated quickly and easily without the slow process of contacting each platform and presenting a death certificate to have accounts shut down.
What are your final wishes?
Let your executor know what you’d like to happen when you pass. This can include the nature of a funeral or service, any charities you’d like to have contributions made to, or whether you’d like to be cremated or buried. Making these wishes clear now will help ensure that there is no confusion or dispute when you’re no longer here.
When it comes to your financial fitness and the peace of mind that your estate will be properly taken care of when you pass, it’s important to prepare yourself now. Westoba Financial Solutions has qualified advisors on staff who can assist with the estate-planning process, as well as products available to satisfy estate needs. We’re here to help you navigate the process and find solutions that best fit your personal financial situation and goals. Get in touch with us today and feel comforted knowing that we have you covered.
