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Wills & Estates – What’s Your Legacy Plan?

It’s been said that nothing is as certain as death and taxes. As CPA’s we might add another certainty – tax implications after your death. However, being aware of the inevitable does not automatically prepare us for the inevitable.

Our experience has taught us that the legacy people leave for their loved ones can either be fair, sensible, and considerate; or one that results in confusion, confrontation, and chaos. What makes the difference? A desirable legacy plan starts with being accurately informed of your options and then taking the necessary steps to prepare a legally binding arrangement – before the unavoidable happens.

Being accurately informed first involves understanding the “lingo”. Many of us have heard terms like “Wills, Executors, Trustees and Estates”, but what do they all mean exactly? Here is a brief breakdown.

Wills

A Will sets out your wishes regarding all your belongings after your demise. There are many reasons why people hesitate to write their Wills. If something has been holding you back, think of what a Will accomplishes:

  • Safeguards guardianship for your beneficiaries of your most valuable belongings
  • Outlines your wishes, which takes some pressure off your already grieving family
  • Ensures specific people receive what you choose from your assets
  • Protects your business interests
  • Makes sure donations go to charities dear to your heart
  • And a lot more (Consulting a lawyer is also a MUST DO step)

It’s good to review your Will every 3-5 years. That said, while a Will is valuable, it works in harmony with many other important legal documents. However, a Will only controls what happens to assets that flow into your estate (i.e. assets not held jointly with another person who has rights of survivorship; insurance policies, registered accounts, and pension plan benefits without named beneficiaries, etc.).

Estates

Your Estate is the collection of assets and liabilities that legally flow under the terms of your Will into what amounts to a newly created separate entity.  That separate entity, called your Estate, is a separate taxpayer under our tax laws and has the obligation to follow the instructions contained in your Will, as carried out by your “Executor/Executrix”.  The Estate can be in existence for many years, or a short time depending on the instructions in your Will.  Choosing an Executor of your Will (who becomes the Trustee of your Estate) is likely one of the most important decisions you make in drawing up your Will.  Picking your best friend is often a first-choice, but it may not be the best idea. Think about this, if you pass at the ripe old age of 93 and your best friend is also older, leaving them this important and demanding job could be very stressful for them. It’s good to think carefully and discuss the implications frankly with the individual you are thinking of selecting.

Estate Plans

A common misconception is that Estate Plans are only for the extremely wealthy. If you own a car, a house, and have bank accounts – then you could benefit from an Estate Plan. It’s especially important to have an Estate Plan if you own a business, have minor children, have assets in foreign countries, or have any concerns that your Will may be contested by a relative, business associate, or a previous life partner.

An Estate Plan not only assures your assets are distributed with maximum tax benefits to the beneficiaries after your death but can also outline how to deal with your needs while you are still alive. For example, if because of health conditions you are unable to speak for yourself or make sound decisions, your Estate Plan can include a Power of Attorney or Living Will which speak for you or designate others to make decisions on your behalf.

An Estate Plan includes (among other things):

  • Your Last Will and Testament
  • Beneficiary designations – registered accounts
  • Transfers of property or financial assets (before death or under the terms of your Will)
  • Power of Attorney for Property (designated individual to take care of your finances)
  • Power of Attorney for Personal Care (designated individual to make medical decisions on your behalf)
  •  A “Living Will” (your written request regarding life-prolonging treatments)

This blog is meant clarify things, but this is not the entire story.  The easy part is understanding the “lingo”. The challenging part is implementing a plan as there are lots of critical decisions to be made. That’s where the professionals at SYC can help. We have used our knowledge and experience to help clients with Estate Plans for decades. We can work with you and your legal counsel to create a legacy plan that will give you peace of mind now and enable those you care about to remember you with fondness for years to come.

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