Estate Planning

Will: a written statement by which you dispose of your property after your death.

The Dependant Relief Act (DRA)

  • Does DRA or MPA apply?
  • Do any assets pass outside the estate? Beneficiaries from a prior relationship?

The Family Relief Act (FRA) and Matrimonial Property Act (MPA) impose some obligations on how you may dispose of your property. It applies if you have a spouse or dependent children.

Power of Attorney (EPA)
– An EPA is a document authorizing another to manage your financial affairs, even if you later lose mental capacity. It replaces the need to obtain a Court Order for trusteeship should you lose mental capacity.

Personal Directive (“Living Will”) A PD is a document authorizing another to manage your personal affairs and health care should you become unable to make those decisions. It replaces the need for a Court Order for guardianship should you lose mental capacity

To Consider when Drafting a Will

  • executor
  • alternate executor
  • guardian for minor children
  • alternate guardian
  • burial/cremation arrangements
  • tax consequences
  • debts/creditor proofing
  • does estate consist of ?
    • life insurance
    • joint assets
    • pension plans
    • assets in foreign countries
    • heirlooms
    • personal guarantees
    • support obligations
  • distribution
    • all to spouse
    • life estate to spouse
    • all, Children equally
    • trust for children
    • does FRA or MPA apply
    • do any assets pass outside the estate?
    • beneficiaries from a prior relationship

Some Assets Pass Outside of the Estate

  • Joint Tenancy – Property you hold in joint tenancy does not form part of your estate. The surviving joint owner automatically takes all, no matter what your will says.
  • Life Insurance – The proceeds of a life insurance policy are paid to the beneficiary named in the policy. They do not go to the estate unless the estate is named as the beneficiary or named beneficiary predeceased. You can make an insurance declaration in your Will to change the named beneficiary and can set up an insurance trust – separate from the estate trust.
  • Pension Plans – Most RRSPs and RRIFs allow you to name a beneficiary. If so, the proceeds are paid to the named beneficiary. The proceeds can be “rolled over” tax free to your spouse. Caution!  The RRSP/RRIF is deemed to have been cashed in immediately prior to death. Thus, if no rollover is available, the estate pays the tax while the beneficiary enjoys all the proceeds. This can work a hardship.
  • Intro Vivos Gifts – Gifts and family trusts can be made during your lifetime.

Tax Consequences

In Alberta there are no inheritance or Estate Taxes. However, there are capital gains and income taxes. There are deemed dispositions on death. Death triggers capital gains and makes taxable RRSP’s, RRIF’s and other pension plans. Certain “rollovers” and exemptions may be available depending on the circumstances.

Each case needs to be dealt with on an individual basis, possibly with a tax adviser or a lawyer who specializes in tax law.