Even if someone has been proactive and drafted their own will, their estate plan can still fall apart at the seams if the will wasn’t flexible enough or wasn’t drafted with tax efficiency and post-mortem strategies in mind.
In the absence of a will that has been meticulously drafted with guidance from wills and estates lawyers, Canadian heirs could end up paying more tax than they had anticipated and experience a number of outcomes very different from what they had expected and hoped for.
Let’s take a closer look at postmortem estate planning:
The term “post-mortem estate planning” refers to the legal and tax strategies that can be put into action once a person has died. Aimed at reducing overall tax obligations, side-stepping double (or in some instances, triple) taxation, and facilitating the transfer of wealth to beneficiaries in a smooth and effective manner.
Flexibility in post-mortem estate planning is largely dependent on the presence of a strong will, and although such planning takes place after someone has died, its success typically hinges on a series of choices that are made long before.
More than just a legal formality, a will is a powerful document that gives beneficiaries, personal representatives, and professional advisors the power to act. If the appropriate tools haven’t been embedded in it, advisors may struggle to rectify poorly structured assets, dodge tax pitfalls, or carry your intentions out effectively.
Choosing executors and trustees
Although immediate members of the family are often the first choice for executors and trustees when wills are being drafted, it may be that when it comes to managing the complicated process of estate administration, they are woefully ill-equipped.
Choosing executors and trustees should be a careful process that includes a discussion with the intended appointee about their role and the responsibilities that come with it. Appointing a professional trustee or trust company is always an option and should always be given consideration.
The scope of trustee powers
Although there are certain powers held by executors and trustees that have been granted them by legislation, their authority may not be as strong as desired, depending on how the will has been drafted.
When creating a will, the drafter must seek professional guidance from a wills and estates lawyer to ensure that the scope of the trustee’s powers is broad enough, while not giving them carte blanche to act in a manner contrary to the intentions of the will drafter.
Specific and residual bequests
If specific rollover provisions in income tax legislation have been used deliberately by the person making the will, it might be appropriate to identify and bequeath certain assets and properties to an individual who qualifies, such as a surviving spouse.
This is an exception, though, and outside of this, will drafters must give careful consideration as to whether a mismatch between the asset and its associated tax liability could be the result of assets or properties being made specific gifts.
Should the will-drafter wish for assets to be transferred to a spousal trust that qualifies, the will’s terms must be drafted carefully to make sure that all conditions for qualifications are met and that the executors’ and trustees’ actions in administering the trust are in accordance with those qualifying conditions.
With expert guidance about Wills in Edmonton, it’s possible to draft a will that takes your personal situation and wishes into account while facilitating smooth and effective post-mortem estate planning. For further, more detailed support, reach out to a local wills and estates lawyer today.
