Today's article is aimed at people who want to influence what happens to their assets after they die. If you don't care what happens to your money after you are gone, stop reading now. If you prefer to know your options so that you can make better choices, we invite you to keep reading.
An important thing to understand when doing estate planning is the concept of probate. Simply put, probate is the legal process in which a will is proven or authenticated. Probating a will provides the necessary assurance to a bank that they may take instructions from the executor named in the will. And banks won't act until they receive this assurance, so if the probate process takes longer than expected, complications will arise.
How does this affect you? Well, it doesn't, because you're not longer with us, but it can sure cause problems for your heirs. For instance, any money held in a non-registered account at a bank is subject to probate. So in spite of your best intentions of naming your son and daughter as beneficiaries on the account, the bank won't hand over the money until the will is probated. In some instances, this can take months and in extreme cases it can take years. In the mean time, your kids wait and while they do they must pay your final tax bill and income tax on any interest earned on the money. Worse still, the money is subject to legal and probate fees so when they do finally receive the funds it will be less than they expected.
If your kids and/or the executor need this money to deal with your final expenses, they are out of luck. Hopefully you have adequate life insurance coverage in place to assist with your final expenses. This is because life insurance benefits are paid out to named beneficiaries within a couple of weeks of claim submission. Moreover, the proceeds of the life insurance policy are not subject to probate fees, legal fees or taxation. So this money is available in short order to help finalize your affairs and it alleviates a lot of headaches for those left behind.
A few other benefits that come with investing your money through an insurance company instead of a bank can include creditor protection, income for life, and maturity and death benefit guarantees on the principal. To find out more, we encourage you to contact a financial planner who also holds a license to sell life insurance. If you are interested in looking at ways to reduce your estate costs and preserve your assets for your loved ones, please make sure that you take the time to speak with someone who can offer you a complete solution.
Who we are:
Barry Altman, PEng, CFP
Barry lives in Meaford, having moved here from Elora almost five years ago. He has over 25 years of experience in private business in a number of fields including finance, sales, design and project management of numerous projects in North America, Europe and South America. Barry is a Professional Engineer and a Certified Financial Planner.
Owen Craig, B.Comm, M.A. Econ.
Owen joined Sun Life in 2008 after spending a dozen years in energy trading. Before leaving Calgary, he was responsible for managing a commodity portfolio worth over $200 million per year on behalf of Alberta consumers. But having grown up in small-town Ontario, he began exploring opportunities to come back this way. When Sun Life approached him about utilizing his skills to develop lifelong financial solutions that work for people, he jumped at the chance to relocate his family to the Georgian triangle.
Note that the information provided in these articles will, by necessity, be general in nature and you should always consult a qualified professional for advice on your specific situation. The opinions expressed are solely those of the authors and do not necessarily reflect those of the companies we represent. The authors retain all rights to publication.
