Jim Yih: Estate planning 101
Many years ago, my mother had a massive stroke at the age of 56 and became a dependent adult.
Whenever I think about that frightening time, I am reminded how important it is to have three essential documents as part of your estate plan: a will, an enduring power of attorney, and a personal directive.
Let’s look into these documents in a little more depth.
EVERYONE NE EDS A WILL
I think the most important legal document of your estate plan is the will.
This legal document leaves instructions about what you want done with your money, assets and personal possessions after you die.
A will defines your beneficiaries, your executor, guardians and trustees. Beneficiaries: A will makes clear who gets what after you die. This is important even if you don’t have a lot of money. Without a will, you are considered to die intestate and the law determines your beneficiaries for you. Executor: The will appoints an executor who has the responsibility of seeing that your wishes are carried out. Most people choose a family member, their lawyer, or their financial adviser. The executor has a lot of responsibility; choose someone who can handle a difficult task and who has some financial experience. Ultimately, your executor should be someone you trust.
Your will should also appoint an alternate executor in case your primary executor dies, can’t do it or won’t do it. Guardians: For parents of dependent and/or minor children, the will is critically important, because it appoints a guardian of your choice for your children. Without a will, the Ministry of Children and Families in your province will step in and choose a guardian for you.
Just as it’s a good idea to choose an alternate trustee, it’s also a good idea to choose an alternate guardian. Trustee: If you have minor children, appoint a trustee to manage your money for your children until they reach adulthood or a specified time when they can manage it themselves.
ENDURING POWER OF ATTORNEY
The second formal document in an estate plan is the enduring power of attorney.
This important legal document appoints someone to make financial and legal decisions on your behalf when you are not capable of doing so yourself. This person is called the attorney. The enduring power of attorney not only appoints someone to manage your financial affairs but it also sets out that person’s powers.
If you do not have this set up when you lose your mental capacity to manage your own affairs, then the Public Trustee takes over until someone else is appointed by the courts. No one — not even your spouse or a child — has the legal power to manage your affairs in the absence of an enduring power of attorney or a court order.
You can cancel in writing an enduring power of attorney at any time as long as you have the mental capacity to do so.
PERSONAL DIRECTIVE
The third document essential to an estate plan is the personal directive (sometimes called a living will or a health care directive). It appoints an agent to make health-care decisions for you if you are alive but cannot do so yourself.
If you do not have a personal directive, when you lack the mental capacity to make decisions the Adult Guardianship & Trustee Act authorizes the court to appoint a person.
DOING I T YOURS E LF
When it comes to preparing a will, enduring power of attorney and a personal directive, you can legally prepare these documents yourself if you know how.
But preparing these legal documents requires certain wording and the ability to state your wishes clearly. It’s too easy to make a mistake and sadly it’s your loved ones that will suffer the most. In most cases, it’s much better to pay a lawyer to draft these documents properly.
As part of the estate-planning process, start with these three documents and the rest of your plan wi l l fol low accordingly.
All other estate-planning decisions, such as beneficiary designations and how you own certain assets, must work in concert with these three legal documents.