Estate planning vital for illness and death

Last will and testament is a document that determines who will inherit any assets if no joint ownership or beneficiaries are listed. /123RF
Last will and testament is a document that determines who will inherit any assets if no joint ownership or beneficiaries are listed. /123RF

Did you know that you already have an estate plan? That is right. Our government has general, default laws that apply in the event that you are physically incapacitated or die.

But most of the time these laws will not manage your estate the way you would want it to be managed - you would essentially be letting a complete stranger make decisions regarding your health and your assets. You do not want this to happen, so it is best to create a plan that manages your estate on your terms.

We know that being sick or dying is something you would prefer not to think about. You may also think that setting up an estate plan is expensive, or that you are too young to have one, or do not have enough assets to make such a plan worthwhile.

But it is important for everyone to prepare an estate plan. By having one in place, you will remove any doubt around your wishes when it comes to protecting your family, loved ones, and assets, in case you are unable to do so.

What is estate planning?

Estate planning is the act of preparing for the transfer of your wealth and assets in case of illness or death. Items that are part of your estate include your financial assets, life insurance, pensions, house, cars, belongings and debts. At its core, an estate plan can be broken down into two phases:

Some of the important decisions you need to make at this stage include instructions on how to manage your finances in case you are unable to do so due to illness, injury or old age, and who you would want to be in charge of carrying out these instructions.

Some of the important decisions to make for this stage include:

These are major decisions that should not be left to uncertainty or the laws of the government. This is why your estate plan will provide security in knowing that your wishes will be carried out exactly as planned.

Key documents for your estate plan

Last will and testament (will): Your will is the document that determines who will inherit any assets if no joint ownership or beneficiaries are listed. If you did a good job at naming beneficiaries for most of your assets, this document will mostly be reserved for personal belongings.

However, a will has other important features like naming a guardian to look after your underage children, and naming an executor, the person who is charged with ensuring your wishes are carried out.

There are some situations where you may not need a will. First, you have no minor children and you do not own anything of value or that you want to bequeath (leave assets) to someone.

Second, you do have assets, but all of them are transferable without a will. These include retirement funds, assets like your home or bank accounts that are owned jointly, and any assets that will transfer on death to a named beneficiary.

A trust: You as a trustor will assign trustees (usually including yourself) the right to hold title to your property or assets for the benefit of your beneficiaries. Trustees are named to oversee your estate, allowing for increased flexibility, privacy and control, even after you pass away.

For this reason, trusts are more expensive than basic wills. Keep in mind that there are many different types of trusts and an estate planning professional can help you decide which one is best for you.

Taking the next steps

The best strategy for estate planning is to focus on what you would like to happen today, rather than anticipating events and circumstances into the future. A solid estate plan is an important step to ensure you and your assets are protected in the worst-case scenario.

While you now have the basics, this is just the beginning. The laws change over time and every personal situation is different, so you should speak to a wealth manager or financial adviser to help you
navigate this journey.

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